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Is it really possible to buy a home with little-or-no down payment?

Yes.

Conventional (bank) home loans require a 20% down payment, credit check and qualifying income. A number of other options do exist. Of course most home buyers that you know (especially first time buyers) probably paid 5 or 10% down — this is pretty standard and is done with Mortgage Insurance (MI), either Private Mortgage Insurance (PMI) or a government program like FHA, VA or Rural Development.

A real estate agent is the best person to fully explain the options that will work best for you in your unique situation and, if necessary, send you to the right lender.

Private Mortgage Insurance (PMI)

Qualified buyers can purchase a home with as little as 5% down by paying for “Private Mortgage Insurance.” (This number is 3% down with a Community Homebuyer’s loan and more recently PMI programs have been available with zero down.) PMI is the private counterpart to FHA and VA insurance, for borrowers or properties who don’t qualify for the government programs. PMI loans involve an added premium on each month’s payment.

Qualifying Income

Conventional loans rely on debt-to-income ratios to qualify customers. No matter how good a person’s credit, he cannot qualify for a conventional or government loan if his debt would exceed these limits. For conventional loans, the ratio is 28% of gross (pre-tax) income for the house payment and 36% of gross income for total debt, including car payments, credit card payments, etc as well as the home loan. For FHA and VA loans, the ratios are higher, meaning you can qualify with a lower income. If you don’t qualify, you will need to get a “nonconforming” or “nonqualifying” loan. These loans generally have higher interest and loan-to-value. In other words, the downpayment will need to be bigger unless the seller will “carry a second,” for part of the downpayment.

Please note: This is not an offer to extend credit or an advertisement for credit. This page is solely intended to provide information and education to our clients and customers and potential clients and customers. We will be glad to assist you in finding property to purchase and to refer you to appropriate sources of financing. However, we do not offer financing directly and we are not in a position to guarantee the continued availability of any financing programs administered by others.