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While it’s true that buying a home often requires cash for a down payment and closing costs, it is
possible to buy with limited funds. A common myth is that you need 20% down to buy a home. Yes,
this is an ideal amount, but by no means a requirement.
Down payment guidelines are more relaxed today, and the truth is, a variety of programs can open
the door to affordable homeownership.
LOW TO NO DOWN
If you’re thinking about buying a home, but don’t think
you’ll qualify due to limited resources, you’ll be happy to
know that many programs allow purchases with as little
as 3% to 5% down.
You can get an FHA home loan with as little as 3.5%, and
you can qualify for conventional home loans with only
3% to 5% down. Also, if you’re active duty, a veteran or the
eligible spouse of a qualifying veteran, you can purchase
a home using a zero-money-down VA home loan.
Are you thinking about buying a property in a rural area?
If so, a zero-down USDA home loan might be an option.
And the good thing about USDA loans is that you don’t
have to live in the middle of nowhere! Many small suburbs
and towns on the outskirts of metropolitan cities qualify as
rural and may be eligible for these loans.
Another option is to see whether you’re eligible for the
Mortgage Tax Credit Certificate (MCC) program. This tax
credit is available to low-to-moderate income buyers for as
long as they live in the residence.
This is not a tax deduction, though, but rather a dollar-fordollar tax credit to reduce how much you owe the federal and
state governments. And as a result, you’ll have more available
income to qualify for a mortgage. This tax credit is up to 50%
of the mortgage interest paid, up to $2,000 a year.
In addition to a low down payment mortgage, you may
be eligible for a homebuyer’s down payment assistance
program offered by your state. These programs are
designed to make homeownership more affordable and
accessible to borrowers. If eligible, you can receive help
with your down payment and/or closing costs.
The type of help varies by location. Some eligible
homebuyers receive a second mortgage to cover their
down payment or a no-interest loan, whereas others
might receive a home buying grant. To learn about
state home buying assistance programs in your area,
visit the online website for the U.S. Department of
Housing and Urban Development (HUD).
Along with mortgage programs, statewide homebuyer
assistance programs and tax credits, some individual
mortgage lenders have their own down payment
Program requirements do vary depending on the
mortgage company. For example, some programs are
specific to first-time home buyers. Others may only
provide assistance to those with low-to-moderate
incomes. In either case, these programs provide eligible
borrowers with down payment and/or closing cost
assistance, up to a certain percentage, which puts
homeownership within their reach.