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How to Buy a House When You Don’t Have Money for a Down Payment

Many aspire to homeownership as the ultimate sign of adulthood. First-time buyers may be intimidated by the amount of money needed for a down payment. Typically, most lenders require 20% of the home purchase price as a down payment. Lenders then loan the rest of the purchase price as a mortgage. But what can an aspiring homeowner do if they don’t have that much money to use as a down payment?

USDA and VA Loans

The Department of Veterans Affairs and the USDA offer to back loans made that meet their guidelines. VA loans and USDA loans are available to specific buyers but sometimes require additional paperwork and screening.

VA loans are available to all active duty military and veterans who were honorably discharged from service. USDA loans, also called Section 502 mortgages, are available to anyone purchasing a home in some rural areas. They are meant to help buyers under a certain income threshold still become homeowners.

FHA Loans

These mortgage options do require a down payment, but one that is significantly lower than the traditional 20%– buyers only need to put down 3.5% of the home’s purchase price. They are also available to those with less than stellar credit, something that may disqualify an individual or family from another type of mortgage. Keep in mind that FHA loans are not loans. Instead, it is the way that the loan is guaranteed. Lenders using the FHA program know that their investment will be repaid.

Other options, such as paying Private Mortgage Insurance (PMI) or working with sellers to privately finance the purchase, may also be an option. But VA loans, USDA loans, and FHA loans remain the most widely used mortgage options for those without 20% to put down on the purchase of a new home.

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