With the homes appreciating rapidly in value, less is more when it comes to a down payment on a home. Many aspiring home owners wonder how you can pay the absolute minimum to buy a house. In today’s booming market, you can put as little as 3 percent down. As your home goes up in value and you pay down your mortgage, you quickly arrive at a 20 percent equity level. With some mortgage options, you can put down 3 percent and still pay no PMI or private mortgage insurance. To pay the absolute least amount of money, consider no closing cost programs and no down payment requirements for Department of Agriculture or USDA and VA (The Department of Veterans Affairs) loans.
Choosing a no down payment
With a VA loan, you don’t need to come up with a down payment if you are a qualified active-duty serviceman or veteran. Some members of the Reserves or National Guard also qualify. With a VA loan, there is no PMI because the VA guarantees the loan. Even though you pay a funding fee, it’s easily rolled into the loan.
Opting for a rural development loan
Experts say the USDA’s rural development mortgage program is not just for farmland. The USDA mortgage guarantee program is becoming increasingly more popular since there is no down payment required. Still, there are some geographical limitations as well as limits based on household income. If you are a first-time home buyer, consider the program that also has no mortgage insurance. The USDA charges of 2 percent guarantee fee that your lender can roll into the loan.
Other options include a low down payment of 3 percent of the purchase price of the home by paying PMI. PMI often costs less than FHA mortgage insurance, but you can talk to your licensed mortgage broker about the pros and cons. With a FHA, you put 3.5 percent down. The FHA program is ideal for people with poor credits. With the FHA loan, you pay an upfront premium of 1.75 percent of the mortgage total. In addition, borrowers pay an annual premium of 0.85 percent of the mortgage or about $70 a month.
For many people, playing the absolute minimum to buy a home makes a lot of sense because it frees up your money for more important things. Whether you want to invest in the stock market or buy new furniture for your home, it’s nice to have financial flexibility.