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  • Writer's pictureYour #1 Phan

Do I Need 20% Down to Buy a Home?

The longest running myth in home buying is that you have to have funds to cover a 20% down payment and perfect credit to buy a home. Not true!


FHA has programs as low as 3.5 percent down for qualifying borrowers who buy within maximum loan limits. If you are a veteran or active-duty military, loans are available with no down payment through the Veterans Administration.


Borrowers with less than perfect credit can get loans, as well. Yes, higher credit scores help qualify borrowers for better rates, but the rule of thumb is simple - less money down requires a higher credit score and vice versa. A down payment is simply your way of showing the lender that you are willing to risk your money to buy the home you want.


For example, if you have a credit score of 500 or better, you can buy a home through FHA with 10% down. The larger the down payment, the more likely the lender is to make the loan. Your credit score will tell you how much money you have to put down; it's a factor in your interest rate. If you put 20 percent down, you can get a loan even if you have a low credit score. With a higher credit score, the lender will approve a loan with less money down.


Where the down payment money is coming from is also important. Lenders expect first-time buyers to get help from family to buy a home, so there may be limits to the size or percentage of the down payment gift that the lender will allow. Check with your lender before a gift is given to ensure it is handed to you in an acceptable, trackable manner.


How can I get you into the best position to make an offer? I'll work side-by-side with you and your preferred lender to come up with a strategy. Get prequalified and be up front about the source of your down payment money. A good lender will explain the true costs of borrowing to you so you can comfortably afford the home you want as well as the monthly payments. And with your ideal budget, we can confidently find your next home together.

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