A big worry for potential home buyers is that you’ll have to make a 20% down payment, but this is a common misconception, and you do have some options:
1. Seller Concessions: A seller may be willing to help the buyer with closing costs, and less closing costs equals more money that the buyer can use to for their deposit. Talk to your real estate agent. He or she may be able to negotiate concessions on the closing costs, ranging anywhere from 2% to as much as 9% of the overall sales price, depending on the type of mortgage you get, the various caps on concessions, or the difference between how much you put down and the amount you finance.
2. Government Options: There are programs offered through The U.S. Department of Housing and Urban Development (HUD), including assistance with down payment and closing costs. There are usually certain income or location requirements, but HUD also offers help based on certain jobs. In fact, if you’re a teacher, firefighter, EMT, or police officer, you may be eligible for a 50% discount on the HUD-appraised value of a home in so-called “revitalization areas.” There are also additional discounts and opportunities for financial assistance available for veterans and those who qualify for an FHA-insured mortgage.
3. Employer Assistance Potential: Buyers may be able to get financial help in purchasing a home from their employer. Low-to-moderate income workers can sometimes receive down payment assistance through Employer Assisted Housing (EAH) programs. Just ask your employer’s human resources department or benefits personnel whether your company participates in an EAH program.
4. Special Lender Programs: There are many lenders who offer programs to help you buy your dream home with a small down payment. For example, FHA mortgages can require as little as 3.5% down, although there will be both upfront and monthly mortgage insurance payments. Other lenders may only require a 3% down payment with no mortgage insurance requirement, and a regional bank might have its own first-time buyer program.