One of the more common questions that future home buyers have is about the down payment requirement for a new home. For decades, a 20 percent down payment has been traditional, but this figure seemingly makes buying a new home cost-prohibitive. Consider that the median home price in Washington, D.C. is more than $450,000. A 20 percent down payment will yield a $90,000 down payment.
This is a staggering figure for many people, and you may be inclined to simply give up on your dream of homeownership. After all, many people do not have that amount of cash available for immediate use in a savings account. It may take many long years or decades of solid effort to save that amount of money. This is particularly true if you have an average income or lower. It may also be challenging if you have substantial student loan debt or other factors impacting your budget.
Before you walk away from your dream of being a homeowner and resign yourself to being a renter for the next few decades, take time to learn about some of the many ways that you can potentially make a smaller down payment on a new home. As your Washington DC mortgage broker, we may be able to help you get into a new home through some of our creative and flexible financing options.
Conventional Home Loans
When many people think about conventional home loans, they think about a loan program has a strict 20 percent down payment requirement. However, there are various types of conventional loan programs, and they have different down payment requirements. Many conventional loan programs accept as little as 5 percent down. You can even apply for the Conventional 97 loan program, which has a 3 percent down payment requirement.
FHA Home Loans
FHA is an acronym that stands for Federal Housing Administration. FHA home loans are offered through banks and other lenders, and they are guaranteed by the government. This guarantee protects banks against loss if you default on the loan, so the loan terms are often less stringent than what you would find with another loan program. If your credit score is at least 580, you may qualify for a loan with as little as 3.5 percent down. If your credit score is between 500 and 579, you may only need to make a 10 percent down payment. Approximately two out of every five residential mortgages in the United States are FHA loans.
The USDA is the United States Department of Agriculture, and the USDA loan program is designed to make it more affordable for people to purchase homes in rural areas. If you have a credit score of at least 640, you may receive automatic approval under this loan program. Qualifying applicants may be able to obtain a zero-down loan with up to a 30-year term.
The VA is the Veterans Administration, and it offers services and support to current and former military members as well as for their family members. Depending on your qualifying factors, you may be able to qualify for a zero-down loan under this program. While some of the other lower down payment programs require you to pay mortgage insurance with your regular monthly payment if you make less than a 20 percent down payment, the VA loan program does not have this requirement.
Keep in mind that the Busch Team at First Savings Mortgage is your source for these loan programs, and we also offer other similar programs that have a low down payment requirement.
Raising Down Payment Funds
With a zero-down loan program, you often are still required to pay closing costs. If you do not qualify for a zero-down program, you will also need to make a down payment. Considering that a 5 percent down payment on a typical $450,000 in Washington, D.C. is $22,500, this is still a large amount of money. If you are looking for convenient or creative ways to find the down payment funds that you need to apply for Washington DC mortgages and to get into your own home, keep in mind that there are a few options.
For example, many home loan programs enable you to accept a monetary gift from a close family member. There may be limits on the amount of money that you can receive as a gift depending on the loan program that you are interested in. If obtaining a gift of funds from a family member is not an option, you may also think about applying for a state grant or taking advantage of the benefits of Community Lending Programs. Some people even pull money out of a retirement account. In some cases, homebuyers are able to raise all of the additional money that they need for a down payment through one of these sources. In other instances, homebuyers may pull together financial assistance from multiple sources to obtain the necessary down payment funds.
As your preferred Washington DC mortgage broker, we have helped many people like you to get into a home. If you think that buying a home is unaffordable, reach out to us to learn more about some of the many types of Washington DC mortgages available that have affordable down payment requirements. We can also help you to explore grants and other options available for down payment assistance. Rest assured that our goal is to help each of our valued clients get into their own home. To request more information and to begin making your dream of homeownership a reality, contact us today for a consultation.