It’s important to know that you don’t need a 20% down payment when purchasing a home. There are several programs that require as little as 3% down. It’s important that you talk to your lender about which loan program would benefit you the most.
There’s a program provided by Freddie Mac called Freddie Mac’s Home Possible AdvantageSM in which qualified buyers can make a down payment as little as 3%. According to Freddie Mac this 3% down payment can come from many sources including personal funds, gift funds, grants and affordable second mortgages. Just keep in mind that when your down payment is less than 20% of the purchase price, you will be require to pay PMI (private mortgage insurance) until you have built up 20% equity in your home. PMI is an insurance policy that protects the lender in the case you cannot pay your mortgage.
According to the Realtors Confidence Index from the National Association of Realtors, 61% of first-time homebuyers purchased their homes with down payments below 6% in 2017.
Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying, but in March, 71% of first-time buyers and 54% of all buyers put less than 20% down
If you are one of the many first-time buyers unsure of whether or not they would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!