Coming up with a down payment for a conventional loan can be incredibly difficult – especially when you consider the fact that it’s usually about 20 percent of the home’s total sale price. You’ll still need to come up with closing costs, too.
However, the good news is that you may not have to come up with a 20 percent down payment.
Loans Without 20 Percent Down Payment Requirements
In some cases, you can take out a loan with nothing – or very little – down. The two most common loans people use are VA loans and FHA loans.
If you’re an honorably discharged veteran of the military or you’re currently serving (including in the reserves), you can use a VA loan to purchase a home. A VA loan doesn’t require you to put anything down, and lenders are typically willing to extend veterans favorable terms because the Department of Veterans Affairs backs the loans.
If you choose to use an FHA loan, you’ll still need to come up with 3.5 and 10 percent down. Borrowers with credit scores above 580 are usually eligible for a 3.5 percent down payment; those with credit scores between 500 and 579 will often be required to put 10 percent down, although each lender may have its own policies.
In some cases, using seller financing can prevent you from having to come up with a down payment. Typically, you can negotiate with the seller to determine what terms will work for both of you.
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