Money Down For A Home: What Is Needed?


If all that stands between you and a home is cash, you are likely focusing on how to save it and how much you will need. When it comes to conventional loans, most financial experts advise laying down at least 20% of the home's purchase price for a down payment. In some cases, however, that 20% figure can be disregarded. Not needing to move mountains in order to buy a home can be a relief, so read on to more about some affordable options that reduce or eliminate the need for a down payment.

Why Should You Need a Down Payment?

A down payment is upfront money provided during the closing process that reduces the amount of the loan. You pledge your down payment during the lending process and the mortgage loan underwriter verifies the presence of the funds in your bank account before the loan can move forward. The funds for a down payment can come from savings or a gift, but should not come from a loan since that can affect your creditworthiness.

Down payments serve several purposes:

  • It reduces the loan amount which might allow an applicant to afford a nicer home.
  • It makes the lender more willing to approve the loan since the home is secured with built-in equity right away.
  • The reduced financed portion of the loan means the lender costs less and that the buyers' monthly payments are lower.

Low to No Down Payment Options

Here are few non-conventional routes to home ownership. These mortgage options use government guarantees to help offset the risk for lenders.

1. Veteran's Administration (VA) Loans – These VA loans are aimed at soldiers and has helped literally millions of those who served to own a home. The 1944 GI Bill has extended 20 million 0% down loans. If you don't fit the target population, take heart and see the additional options below.

2. Federal Housing Administration (FHA) loans – This well-known program for those who struggle with conventional loan requirement doesn't have a 0% down payment loan on offer, but they do offer applicants a 3.5% down payment loan. You must have a 580 credit score to qualify for this loan.

3. U.S. Department of Agriculture (USDA) loans – This loan option offers 0% down payment loans but you must have a low income and reside in certain rural areas. Most small towns and suburbs are eligible for help.

4. Fannie Mae/Freddie loans – The final government-sponsored loan option provides loans with only 3% down. Unfortunately, the credit qualifications for these loans are a bit stricter than with the other three above options.


15 December 2018

Know Your Options when Financing a New Business

When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.