down payment

Can I Buy a Home Without a Down Payment?

Saving up for a down payment towards buying a home is an ambitious goal for many Americans.  While the minimum standard for many lenders is between 3% and 5%, the average goal for many homebuyers is to put 20% down.

With increasing home prices, the savings nest egg is much more substantial than in years past.  As of December 2021, the median home value in Oregon was $479,135, and purchasing a home at $500,000 with a 20% down payment would be $100,000.  Even a 3% down payment means coming up with $15,000.

Why is a down payment important?

For buyers, down payments reduce the mortgage’s outstanding balance, making a significant difference in the payment amount and the total payments over the life of the loan.  For example, purchasing a $500,000 home at 4.5% interest with a $15,000 down payment equates to a monthly payment of $2457–a total repayment of $884,671 over thirty years.  However, that same home with a $100,000 down payment would bring the monthly payment down to $2,027, and the total repayment would be $729,720–which is a savings of almost $70,000.

For lenders, a larger down payment means more equity in the home, which gives more reassurance that if the buyer fails to make payments, the lender will get their money back.  For this reason, a lender may require a slightly higher down payment to offset risks associated with non-existing or poor credit.

Also, for most conventional home loans, you will be required to purchase private mortgage insurance (PMI) if you put less than 20% down towards your home.  The PMI insurance protects your lender if you default on your loan.

So what can you do if you don’t have a down payment?

Not having a sizeable down payment should not dissuade you from shopping for a home.  Instead, talk with your real estate agent or your mortgage broker about your financial situation to learn about resources available in your area to assist homebuyers like you.  They will know the ins and outs of all the programs and give you sound advice to help you reach your goals.

  1. FHA loans.  You may qualify for an FHA loan insured by the Federal Housing Administration.  This program offers loans with low down payments and low closing costs.  Even those with poor credit can often qualify for FHA loans.  The maximum amount of loan will depend on regionality but is geared to help medium to lower-income households afford to buy average-sized homes.
  2. Fannie Mae HomeReady loans.  These loans are designed for people who can’t afford a sizeable down payment, first-time homebuyers, and homeowners looking for more affordable refinancing options.  These loans are limited to individuals with moderate to high credit scores while making no more than 80% of the median income for their areas.
  3. Conventional loan with a minimum down payment.  Some lenders will approve loans for as little as 3% down.  It’s essential to ask your real estate agent or mortgage broker about options that may fit your budget and lifestyle.

Are you looking for a home in Southern Oregon?

The best place to begin your journey is with an experienced real estate agent like Gail Schoeneberg.  Gail has extensive experience and knowledge, including marketing financing and buyer and seller representation in the Southern Oregon market.  She will help you determine if buying a home is the right choice for you.  And, of course, once you decide what you’re looking for, Gail will be at your side until you find the perfect new home for your family.

Contact Gail Schoeneberg today at 541-840-1909.  Your new home awaits.

Gail Schoeneberg