The longest running myth in home buying is that you have to have 20% down and perfect credit to buy a home. Not true!
FHA has programs as low as 3.5 percent down for qualifying borrowers who buy within maximum loan limits. If you are a
veteran or active-duty military, loans are available with no down payment through the Veterans Administration.
Borrowers with less than perfect credit can get loans, as well. Higher credit scores help qualify borrowers for better rates.
For example, if you have a credit score of 500 or better, you can buy a home through FHA with 10% down.
The rule of thumb is simple – less money down requires a higher credit score and vice versa. A down payment is simply
your way of showing the lender that you are willing to risk your money to buy the home you want. The larger the down
payment, the more likely the lender is to make the loan.
Your credit score will tell you how much money you have to put down; it’s a factor in your interest rate. If you put 20
percent down, you can get a loan even if you have a low credit score. With a higher credit score, the lender will approve a
loan with less money down.
Where the down payment money is coming from is also important. Lenders expect first-time buyers to get help from
family to buy a home, so there may be limits to the size or percentage of the down payment gift that the lender will allow.
Check with your lender before a gift is given to ensure it is handed to you in an acceptable, trackable manner.
Talk to your lender before you make an offer. Get prequalified, and be up front about the source of your down payment
money. A good lender will explain the true costs of borrowing to you so you can comfortably afford the home you want as
well as the monthly payments.
If you need help finding a lender, I can help you as I work with an excellent partner in the lending institution.
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