Sunday, August 25, 2019

How You Can Buy a House Without Thousands in Your Savings Account



You may think that it isn’t possible to get a mortgage without a large down payment. The truth is that you may be able to get a mortgage with no down payment at all depending on what type of loan product you use. Let’s look at how you can become a homeowner even if you don’t have a lot of cash in the bank.


Look for Loans Insured By the Government


The Federal Housing Administration (FHA) offers loans with a down payment of 3.5%, and the down payment can be gifted by a friend, parent or colleague. Those who are willing to live in a suburban or rural area may be eligible for a USDA loan that comes with no down payment requirement. 


It is worth noting that you will need to pay private mortgage insurance if you make a down payment of less than 20%.

Do You Have Good Credit?


Lenders that offer conventional mortgage services may allow you to make a smaller down payment without having to pay private mortgage insurance. This is generally true if you have a credit score of at least 700 and a steady income. 






If you have a credit score between 640 and 699, it may be possible to be approved for a loan with a down payment of less than 20% if you have significant assets.

Seek a Down Payment Loan


Lenders may allow you to take out what is referred to as a piggyback loan. In such a scenario, you would take out one loan that covers the cost of the home. You would then take out another loan that would cover the cost of the down payment. 


The two loans are repaid simultaneously over the course of several years, and interest rates on piggyback loans are generally the same as interest rates on conventional home loans.

If you find yourself in a better financial situation at some point after closing on the property, you can refinance those loans into one traditional mortgage. In the meantime, you can accrue equity in your home that can be used as collateral for a future loan or other provide financial flexibility.

Buying a home can be a significant milestone in your life. It can provide you with a sense of stability that may be difficult to achieve when renting a home or apartment. If your mortgage comes with a fixed-rate, you will know exactly how much your housing payment is for next 10 to 30 years.


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