Do You Really Need a 20% Down Payment to Buy a Home?

Do You Really Need a 20% Down Payment to Buy a Home?

  • 04/2/18
If you’re buying a home for sale in Scottsdale, you already know that saving for a down payment can be pretty tricky – but do you really need to save up 20 percent?
Here’s what you need to know.

Do You Really Need a 20% Down Payment to Buy a Home?

For most people, coming up with 20 percent of a home’s purchase price is a pretty big hurdle. That means if you’re buying a home that’s selling at $300,000, you need to stash away $60,000 for a down payment, right?
Not exactly.
There are several ways you can buy a home before you have the standard 20 percent down payment saved up, including:
  • Working with the VA, if you’re eligible
  • Using an FHA loan
  • Checking out a conventional 3% down program
  • Working with the state of Arizona for down payment assistance

VA Loans

If you’re an eligible veteran or dependent of a veteran of the U.S. Armed Forces, you could be eligible to work through the Veterans Administration to finance a home. These loans don’t require any money down, and lenders can’t require you to buy private mortgage insurance, or PMI.

FHA Loans

FHA loans have been helping buyers for more than 80 years, and they only require 3.5 percent down. The catch is that your lender will most likely require you to pay for private mortgage insurance (that protects the lender if you default on your payments).

Conventional 3% Down Programs

There are a few types of loan programs that offer financing when the borrower only puts 3 percent down. Fannie Mae does the HomeReady™ Mortgage and the Conventional 87. Your lender will be familiar with the requirements for each of these programs and can tell you if you’re eligible based on several factors (including your income).

Arizona Down Payment Assistance Programs

There are a few programs you may be able to take advantage of if you’re a first-time homebuyer in Scottsdale, including:
  • Arizona Home Plus, which allows the assistance to cover down payments and closing costs; you don’t have to be a first-time homebuyer to use Arizona Home Plus.
  • Home in Five Advantage, which is only open to Maricopa County residents; these can provide up to 3% of a down payment (4% if you’re a qualified veteran or service member) and don’t require repayment.
  • American Dream Downpayment Initiative, which requires you to be a first-time homebuyer and can cover up to $10,000 or 6% of the home’s purchase price (whichever is greater)
Your lender can help point you in the right direction if you need down payment assistance, and your real estate agent may be able to give you guidance, too.

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