Think You Can’t Afford to Buy a Home? Your Down Payment May Be Smaller Than You Think

One of the things I hear from  potential buyers all the time is:

“I’d love to buy a house, but I just don’t have enough money saved for a down payment.”

And my answer is usually: Have you actually talked to a lender yet?

Because you may be surprised.

There is still a common belief that you need 10%, 15%, or even 20% down to purchase a home. While putting more money down can certainly have advantages, there are loan programs available that require much less — and some qualified buyers may be able to purchase a home with no down payment at all.

As a Realtor, I don't determine which loan you qualify for — that's the job of a licensed mortgage professional. But I can help educate you about some of the options that may be worth asking about.

USDA Rural Development Loans — Potentially 0% Down

This is one that buyers in Arkansas and Missouri should definitely know about.

USDA's Single Family Housing Guaranteed Loan Program offers 100% financing — meaning no down payment — for qualified buyers purchasing eligible properties in designated rural areas.

And don't let the word rural fool you. You might be surprised by the communities and properties that can qualify.

There are income, property and borrower eligibility requirements, so a lender familiar with USDA financing can help determine whether it's an option for you.

VA Loans — Potentially 0% Down

If you're an eligible Veteran, active-duty service member or qualifying surviving spouse, a VA-backed home loan can be an incredible benefit.

Qualified borrowers may be able to purchase with no down payment, and VA-backed loans generally do not require private mortgage insurance.

If you've served our country and have never investigated your VA home-loan benefit, it's absolutely worth asking about.

FHA Loans — As Little as 3.5% Down

FHA loans are another popular option, particularly for buyers who don't have a large amount of cash saved.

For qualified borrowers, an FHA loan can require a down payment of as little as 3.5%.

FHA financing can also allow eligible gift funds and certain down-payment assistance to help with the required investment.

Conventional Doesn't Always Mean 20% Down

Here's another big misconception:

You do NOT necessarily need 20% down to get a conventional mortgage.

Certain conventional programs allow qualified borrowers to put down as little as 3%.

Programs such as Fannie Mae's HomeReady® and Freddie Mac's Home Possible® were designed to make conventional financing more accessible to eligible borrowers. Income and other eligibility requirements may apply.

Down-Payment Assistance Programs

This is an area buyers often don't even know to ask about.

There are state and local programs designed specifically to help qualified buyers with down payments and/or closing costs.

For example, the Arkansas Development Finance Authority currently offers qualifying borrowers down-payment and closing-cost assistance through its homebuyer programs.

Missouri also has homebuyer assistance programs through the Missouri Housing Development Commission, including programs that may provide cash assistance toward down payment and closing costs for eligible buyers.

Some programs are designed for first-time homebuyers, while others may be available to people who have owned a home before.

And Yes — Sometimes Programs Can Work Together

Depending on the buyer, property and loan program, assistance may sometimes be combined with the primary mortgage program.

That's why I don't want someone to look at a home's price, think about the amount they have in savings and automatically decide:

“I can't afford to buy.”

You may be right.

But you may also be completely wrong.

And wouldn't you rather know?

Start With a Conversation, Not a Down-Payment Goal

You don't have to wait until you've saved tens of thousands of dollars before you start asking questions.

Talk with a knowledgeable mortgage lender and find out:

• What loan programs you may qualify for
• How much down payment would actually be required
• Whether you qualify for down-payment or closing-cost assistance
• What price range makes sense for your income and budget
• What your estimated monthly payment might look like
• Whether there's anything you should work on now to prepare for buying later

And if you're not ready today, that's okay too. Sometimes the best first step is simply finding out what needs to happen to get you ready.

As a Realtor, my job isn't to tell you which mortgage to choose or whether you'll qualify for financing. My job is to help you understand that homeownership may have more paths than you realize, connect you with trusted lending professionals who can explain your options, and then help you find the right home when you're ready.

So if the only thing keeping you from exploring homeownership is:

“I don't have enough money for a down payment…”

Don't count yourself out before you've asked the question.

You might be closer to buying a home than you think.

This information is provided for general educational purposes only and is not an offer or commitment to lend. Loan programs, eligibility requirements, income limits, property requirements and other guidelines can change. A licensed mortgage professional can provide current information and determine which programs may be available based on your individual circumstances.