How To Buy A Home With A
Low Down Payment
Purchasing a home with a
low down payment is important for a number of reasons, including the buyer's
ability to have extra cash left over for closing costs, decorating expenses,
upgrades and/or other essentials needed to turn their new house into a home. Thanks to the level of competition between
mortgage lenders, it's now easier than ever to buy a home with a low down
payment.
First-Time Homebuyers
There are a lot of perks
to being a first-time homebuyer, including the ability to get in the door with
a low down payment. Many lenders will
ask for a down payment as low as five percent (three percent for FHA loans) to
those looking to purchase their first home.
A first-time homebuyer is
someone who has rented their previous home(s) or has never purchased a house on
a permanent foundation. Individuals who
have owned manufactured homes may also be eligible for a first-time homebuyer
loan, but the final decision is up to each individual lender.
FHA Loan
This type of loan is
guaranteed by the Federal Housing Authority (FHA) and allows for a smaller down
payment than many conventional loans. In
addition to offering down payments as low as three percent of the total
purchase price, FHA loans often carry lower interest rates and are easier to
qualify for. This type of loan is ideal
for first-time homebuyers, individuals with past credit problems or even those
who wish to purchase a second home.
Provide Your Land As
Collateral
If you own the land that
you intend to build on, many lenders will use the land in place of a down
payment. In other words, you build a
house on the land that you already own, and the lender gets both if you
default. This is why individuals who own
land often choose to build, while using the lot in place of a big down payment.
In addition, many lenders are more
willing to approve a loan if the land is already owned by the buyer.
Owner Financing
When a seller lists their
home, they have the option of considering owner financing. In this situation, a buyer provides a down payment
to the seller and signs an agreement to pay for the home (plus interest) over a
preset number of years. Owner financing
typically requires a lower down payment, which can be any amount that the buyer
and seller agree to. Because there is no
bank qualifying and no credit check, a seller can extend the offer on any terms
that they wish.
