How Do I Buy A House Without A Down Payment?

Many people are ready and eager to purchase a home, and can easily afford a mortgage payment; however, the concern is that they do not have a 20 percent down payment available and wonder if there are any options available for them.

The reality is that if you have good credit, you can probably get a loan. But, without a good down payment, your costs will go up.

To start with, you must have some cash to buy a home. There will be closing costs and you’ll have to pay for taxes and insurance.

But the key is that, without 20 percent down, you’ll have to pay for Private Mortgage Insurance. The idea is that people who put their savings into a property are much less likely to default on a loan. The lender wants insurance that you will pay on your mortgage.

PMI is expensive and the less you put down, the higher the mortgage insurance is. The cost of PMI depends on your credit score and the size of your down payment. According to Mortgage lender Freddie Mac, the cost is from $30 to $70 per month for each $100,000 borrowed. This is added to your monthly payment.

Still, if you want to buy now, you could get a loan from family members. Most lenders will accept this if the family members assert that money is a gift that doesn’t have to be repaid.

If you have 3 percent as a down payment, Fannie Mae and Freddie Mac will back the loan, assuming your credit is good. You will pay PMI.

FHA backs loans with down payments of 3.5 percent. It also has lower credit score requirements. Buyers will have to pay a mortgage insurance premium.

For veterans, a VA loan requires a funding fee of 2.15 percent of the loan up front, in lieu of PMI.

USDA will guarantee loans with nothing down in rural and suburban areas if your income qualifies. It charges a mortgage insurance premium of 2 percent of the loan plus a monthly charge, according to US News.