Many individuals believe you need to have a considerable amount of savings to purchase a house. This is called the down payment, which is the amount you put toward the cost of the house at the start. 

Most individuals believe you have to put in 10% or 20% of the cost of the house immediately, but this is not always the case. The good news is that you can purchase a home with far less money, and sometimes even with zero down payment.

What’s a Down Payment?

If you purchase a home, a down payment is the money you give upfront. It is a percentage of the cost of the house. A loan covers the remainder of the price, otherwise called a mortgage.

Loan Programs That Require Low or No Down Payment

There are homebuying programs that help individuals in purchasing a home, primarily first-time homebuyers.

VA Loans

VA loans are special housing loans to individuals who have served in the U.S. Armed Forces, such as veterans, active-duty personnel, and, in certain situations, the surviving spouses. The Department of Veterans Affairs (VA) guarantees the loans and has significant advantages, making it possible to own homes at affordable prices.

One of the benefits is that there is no required down payment—you can purchase the home with 0% down, so you do not have to have a large amount of capital initially. This can be a huge help, particularly to families relocating frequently or just returning from military service.

One excellent benefit is that VA loans do not charge private mortgage insurance (PMI). Most low-down-payment loans have PMI, which is an additional monthly cost. With a VA loan, you avoid paying it, which will save you in the long run. These advantages make VA loans one of the best deals available to those who can use them.

USDA Loans

USDA loans are government-backed home loans issued by the U.S. Department of Agriculture. They’re designed to assist individuals in purchasing homes in rural or certain suburban areas where housing can be less expensive.

The most significant advantage of taking out a loan is that it only requires 0% down, so you do not have to make a large payment initially to obtain a home.

To obtain a USDA loan, the house has to be in an eligible area—a small town or rural area. You must also meet income guidelines, meaning your income must be within specified limitations determined by where you live.

The limitations are created to ensure the program assists individuals who need it. If you’re eligible, a USDA loan can be an excellent means of procuring a house with zero down payment and little monthly expenditure. It is an option suitable for families who prefer quieter locations away from the hustle and bustle of the city.

FHA Loans

An FHA loan is a government-backed mortgage provided by the Federal Housing Administration (FHA). It is one of the favorite options for individuals who buy their homes for the first time or have less-than-perfect credit.

A significant advantage of an FHA loan is the small down payment. You only have to put in 3.5% of the cost of the house, which is far less than the minimum of 10% or sometimes even 20%. For instance, if the home is $200,000, the down payment would be only $7,000 rather than $20,000 or even higher.

FHA loans also have lenient credit qualifications. You do not need an extremely high credit score to be approved. You can still obtain approval if your credit history has imperfections or you have had financial difficulties. This is why FHA loans work so well for many buyers who require additional financial assistance.

Final Thoughts

It may appear challenging to buy a home if you do not have much saved—it is all right. There are good financing options readily available to assist you in entering the market with little or no money saved.

If you want to learn more about finding the perfect loan and house, the Northwest Realty Group staff is ready to assist you. We will be with you every step of the way, answering all your questions and making the experience stress-free and easy to understand. Contact us today or visit our website to learn how we can make your homebuying experience smooth.