I’m concerned I might not have saved enough money for the down payment. What can I do?
A lack of down payment money may feel like a roadblock denying you homeownership. Many consumers are frustrated in their attempts to save enough for a down payment. But many buyers are able to purchase a house with a down payment of only 5% of the sales price. The monthly mortgage payment is a little higher for low down payment loans, however. The lender usually requires private mortgage insurance (PMI) to cover the difference between the actual down payment and an ideal down payment of 20%. Once the new owners' equity in the home reaches 20%, however, the PMI usually can be dropped.
If coming up with the down payment presents a hurdle for you, there are a number of ways you can meet this challenge:
- Loans insured by the Federal Housing Administration (FHA) require low down payments.
- The Veterans Administration (VA) financing for qualified veterans calls for no money down.
- Some states and localities have special programs to help first-time buyers get into a home.
- You can beat the up-front money crunch by rolling closing costs into the mortgage – an option offered by some lenders.
- Or, you can opt for a slightly higher interest rate with no points.
- Some lenders allow buyers to finance mortgage insurance, so less money is due at closing.
- Also, think about asking the seller to help with closing costs or points.
