How To Minimize Down Payment on a Mortgage

Even in today’s very difficult housing market, people still dream of home ownership.

Most people don’t enjoy the prospect of renting for the rest of their lives while paying money into something that never pays them back.

The problem is that many people are scared away from even thinking about buying a home; not because their credit may be blemished, but because of the high down payments that most conventional loans require.

Most ordinary people simply aren’t going to be able to come up with 20 percent down for a home. There are, however, methods that a potential homeowner can employ to lower or to completely reduce the need for a down payment.

First Time Buyer Status

Perhaps one of the most effective ways to either reduce or eliminate having to make a large down payment on a home purchase is to use a potential homeowner’s first-time buyer status. If you have never owned a home, you automatically qualify for first-time buyer status which can reduce the necessity for a large down payment, sometimes bringing it in the 3 to 5 percent range.

You may think that if you purchased a home in the past, this isn’t an option for you but the reality is that it can be. If you haven’t owned a home for at least three years, you may qualify for first-time buyer status again. This allows you to purchase a home without worrying about coming up with a huge down payment.

Specialized Loans

It’s also important for you to look at the specific loans that lending institutions as well as government organizations are offering. A conventional loan from a bank is going to require, without a first-time buyer status, a higher down payment, sometimes as high as 20 percent, but there are other government-sponsored loans that require low down payments and in some cases no down payment.


For example, an FHA loan requires only 3.5 percent down n order to purchase a home. This is a loan backed by the Federal Housing Administration to reduce default risks to lenders.


A Veterans Affairs (VA) loan has two different types of loans, a conventional loan with a down payment requirement of 3.5 percent and a no money down loan. To qualify for a no money down loan, however, you have a good credit score and the price of the home you’re buying must be below $400,000. Of course, in order to apply for a VA loan you have to be currently serving in the military or be a veteran of the military.


In addition, the USDA also offers loans for rural properties and these loans offer 100% financing with no down payment requirement. There are several restrictions, however, in terms of income limits, credit score, home size, the price of the home and even the location of the home as well. The USDA website offers extensive information regarding eligible homes, including an option to enter a zip code to determine the eligibility of a home you’re considering.

If you thought you couldn’t buy a home simply because you don’t have the means to provide 20 percent as a down payment, you may have other options. With many different programs available, down payment assistance programs as well as special government loans that many people are able to apply for, there are many ways to get home without a significantly large down payment. It may take a little time, and a bit of work for you to find the right loan, but rest assured a low or no down payment loan, even in this housing market, can still be found.

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