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Down Payment Options for First-time Homebuyers

The iServe Blog

One of the factors that stands in the way of renters becoming homeowners is the down payment. After all, you need to put down 20% to buy a house, don’t you? While 20% is the standard down payment for a conventional mortgage loan, there are other options. We’ve gathered some information about other mortgage loan types that require a smaller down payment (or no down payment at all). These can be the ideal choice for renters looking to join the ranks of first-time homebuyers.

There Are Options Beyond Conventional Mortgage Loans

  • VA Loans – A VA loan is available only to active military and veterans and their spouses or widows/widowers. VA loans are guaranteed by the US Department of Veteran Affairs. This is a long-term program designed to make it easier for veterans to purchase a home. As such, there is no money down required, subject to certain limits. For many veterans, qualifying for a VA loan is easier than other types of specialty loans.
  • USDA Loans – A USDA loan is a particular mortgage loan designed to encourage home ownership in rural areas. As such, many people do not think that the homes they are seeking will qualify. In fact, over 90% of the land in the United States is considered rural for purposes of this program. This makes a USDA loan an excellent choice for buyers who need a no-money-down lending program.
  • FHA Loans – An FHA Loan is a mortgage insured by the Federal Housing Administration. There is a very low down payment required (as low as 3.5%) for an FHA loan; although, specific lending requirements must be met to qualify. You will likely have to hold insurance on the loan amount (provided by FHA), which can add to your monthly payment. If you qualify, an FHA loan can be an excellent choice for first-time homebuyers.

Consider Pre-Qualification

The first step no matter what type of loan you are considering is pre-qualification. Luckily, this is easier than you may think. Just apply with your mortgage lender, and let him or her take care of the rest. You may have to provide information such as income tax returns, recent pay stubs, information from bank accounts and other information regarding your financial history. However, once you have submitted this information, the mortgage lender can begin working on your pre-qualification. At this point, you will be better prepared for your home purchase.

If you have any questions regarding pre-qualification or the home buying process, reach out to one of the area’s top mortgage lenders—iServe Residential Lending. Our goal is to help you find the lowest mortgage rate and the right mortgage for you; even if that means no down payment! Contact us today for more information.