Not sure if you can afford a down payment?

Do you want to buy a home, but you don’t think you can afford the down payment? Or maybe you can afford a bigger down payment, but don’t want to deplete your savings. Either way, we’ve got options!

Since we have 142 low down payment options, Stearns Lending can help you get started on the path to homeownership—or moving into your nexthome—sooner. Before looking at the various loan types, let’s review the impact of a low down payment.
  • You’re able to buy a home sooner instead of saving money for an extended period of time.
  • You can keep additional cash in your bank account for emergencies or planned expenses.
  • You’ll start out with less equity in the property, but you’ll be able to start building equity sooner than if you wait to buy a home.
  • Loans with a loan to value of greater than 80% will require mortgage insurance which will increase the monthly payment amount.

Your Mortgage Choices

With so many options to choose from, I want to introduce you to the main loan types and down payment sources. This isn’t intended to replace a comprehensive discussion about the wide range of financing options and your individual needs.1
  • FHA:Backed by the Federal Housing Authority, this financing is generally easier to qualify for and may only require a 3.5% down payment. If you have a limited or less-than-perfect credit history, an FHAloan can be a solid choice.
  • USDA:Although USDAstands for United States Department of Agriculture, you don’t have to buy farmland to qualify. You do have to purchase in a rural-eligible area, but some properties are surprisingly close to cities. Borrowers who meet location, income and credit requirements may be able to buy with no money down. 
  • VA:We believe that veteransdeserve the best—and a loan backed by the Veterans Administration makes it possible for some to buy a home with little or no money down. Active duty military and some spouses may also be eligible. 
  • HomeReady™:This program sponsored by Fannie Mae is a conventional mortgage that requires a down payment as small as 3%. 
  • Home Possible Advantage®:Available for primary residences only, Freddie Mac sponsors this mortgage for first-time or repeat homebuyers. Qualified borrowers may finance 97% of the home’s value (which means you only need a 3% down payment). 
  • Conventional:If you have a good FICO score, you may qualify for a conventionalloan with a 3% down payment. A conventional mortgage generally offers more flexibility than some of the government-backed loans like FHA, USDA and VA.
  • Jumbo:If your looking to buy a house requiring a jumbo loan but can't afford 20% down we have options for you. Certain jumbo loan give you the abilty to buy a larger home while only putting 5% down. 

Unexpected Funding Sources

Sometimes, it can be difficult to come up with even a small down payment or you want to hang on to your liquid assets. In those cases, you may be able to use gift funds (usually from a family member) for all, or part, of your down payment. Certain rules apply to ensure that the monies are a gift and not a loan that must be paid back.
Another option is a grant that helps you come up with down payment funds. Some of the grants are forgivable, meaning that you don’t have to pay them back as long as you meet specific criteria. In addition to (or instead of) national resources, you may be able to qualify for local or state grants.
We’d love to tell you more about low (or no) down payment options. Start your journey today by calling one of our local loan officers!
1  Stearns Lending, LCC is an FHA approved lending institution and is not acting on behalf of or at the direction of HUD/FHA or any other department of the federal government.  This information is a general overview.  Each program has separate guidelines, restrictions, and qualifications and not all applicants will be able to qualify for all programs. 


- By The Compass Hawaii Team, Apr 17, 2019