If you are in the market for a new piece of residential real estate, then you are probably aware of the going “market rates” that are prevalent in the deals that most people make. One such rate is the rather arbitrary 20% down payment benchmarks that many market experts view as the “smart” way to begin your venture into being a homeowner.
How much downpayment do I need to buy a home?
There is some solid math behind this 20% down payment methodology. Putting down this much money will give you instant equity that you can cultivate and grow. It will also save you from having to pay certain insurances on your housing. It will also lower your monthly payments and keep you from having to pay 15 or 30 years worth of interest on the full principal of the house.
However, this strategy overlooks one rather obvious point: Not everyone has 20% to put down a house. Fortunately for these people, there are plenty of ways in which an individual can purchase a house without having to put down 20% or losing out on the many benefits that come with putting down one fifth of the total value of the house upfront.
Getting a VA Loan
The VA loan program is a loan program that is specifically made to help veterans find affordable housing upon their discharge from the armed services. The VA program is not distributed by the government directly as many people might believe; it is actually a private – public partnership between the government and private lending institutions that offers special rates for veterans.
There are also many requirements that veterans are not expected to meet when buying a house; one of those requirements is the 20% down payment. There may actually be no d downpayment involved in a loan for veteran depending on the credit history of the individual who is purchasing the house.
Other deals that are available for veterans include an option for a low downpayment, which will decrease the amount of money that is required upfront. In both of these options, veterans will not lose any of the benefits that would accrue to a person is giving a 20 percent down payment; however, the equity that is in the house based upon this payment will also not accrue to the individual.
The government is also vested in creating homeowners in rural areas. USDA mortgages are created specifically for individuals who live in rural areas, and especially for those who are farming the land. Because the government wishes to subsidize certain types of moral labor, many of the deals that are offered with this type of mortgage include either a low down payment or no downpayment at all.
These 100% financing opportunities that are given specifically to rural households have the advantage of low interest rates. Most of the time, 100% financed loans have extremely high interest rates along with the added payments of extra insurance.
Mortgages that are created by the Federal Housing Administration are meant to increase the amount of homeownership in disadvantaged groups. These groups of people obviously will not have the 20% down payment that is required of many normal mortgages; therefore, in many cases, that payment is completely waived.
FHA mortgages often include a downpayment gift that does not need to be repaid by the homeowner.