Even Without a 20% Down Payment, You Can Buy a Home

There is a myth that has been passed down from parents to children and from college professors to students. It goes something like this, "If you want to buy a home, you need to raise 20% as down payment." In today's day and age, arranging this kind of money is not an easy task.

Luckily, there isn't any need for you to do so.

Many banks accept less than 20% as down payment; however such loans tend to charge a higher interest rate. Additionally, you may have to pay for private mortgage insurance or government insurance – this in turn would increase your monthly payments by a substantial amount. Thus, in such cases, make sure that you get the best deal available by evaluating the most favorable rates against the down payment requirement, along with the monthly payments that you'll need to shell out.

Other Options

Some companies allow you to borrow against your 401(k) plan to make your down payment. This can be a great way to borrow money because all the loan repayments and interest eventually go back into your 401(k) account.

You can also take advantage of certain government-backed mortgage programs – each of these require down payments of less than 5%.

The FHA Mortgage requires the buyer to put up just 3.5% of the home value as down payment. This facility is available to U.S. buyers in all 50 states and the District of Columbia. Instead of offering home loans, the Federal Housing Administration (FHA) insures mortgages if they meet predefined criteria. These FHA-backed mortgages are then underwritten by lenders and are eligible for mortgage insurance.

VA Loans are made by the Department of Veterans Affairs to veterans of the U.S. Armed Services. They offer 100% financing. No mortgage insurance is required for such loans and the rates are also lower than for a comparable conventional mortgage.

Fannie Mae and Freddie Mac offer the Conventional 97 program which requires just a 3% down payment. This is a great option for buyers with above average credit scores who can verify income and employment. It can be had by first-time buyers – and repeat buyers and can also use them for refinancing purposes.

The USDA Rural Housing Loan is another program which is not just available to buyers in the rural areas but also to those who live in suburban areas. It requires no down payment and, in certain cases, buyers can also include in the home price the cost of energy-efficiency improvements to the property. However, these loans are only meant for low to moderate income buyers. The qualifying limits are based on the typical income of consumers who live in that particular area. The USDA Rural Housing Loan is highly coveted, as its mortgage and insurance rates are usually the lowest among all government-backed programs.

One more option to fund the down payment of your home is to use credit cards. A number of banks and equity institutions provide 0% credit cards for a period of 6, 9, 12 and even 18 months. You can raise as much as $250,000 or more through this route and use this amount to make your down payment. However, in order for this to work, you have to satisfy certain of the banks' criteria. The rules are quite complex, and is not easy for most individuals to get the desired amount of funds if they apply on their own. At Funds&Grow, we offer a great solution that can help you achieve this goal. For a flat fee, we'll not only tell you how to get instant approval, but we'll also hold your hand and walk you through the entire process. All you need to do is call us at (800) 996-0270, and well help you turn your home-owning dreams into reality.