Can I Really Buy a Home with No Money Down?
- Homeowner Central
- Frontwave Credit Union
Let’s face it, for most people, the biggest barrier to getting into a new home is scraping up the down payment. The old wisdom was that you had to be able to put 20% of the purchase price down to buy a home. That can add up to over $100,000 for the typical Southern California home — not something most of us just have lying around.
Truth be told, the 20% down payment “requirement” is largely a myth. According to a report by the National Association of Realtors, the median down payment in 2019 was 12% overall, and just 6% for first-time homebuyers. And even those are just averages, not necessarily requirements.
Many lenders offer low- and no-money down options.
Here at Frontwave, we offer several low- and no-down payment options for qualified buyers:
- A Frontwave VA Loan offers up to 100% financing for active-duty and veteran Members who meet the service requirements set by the Veterans Administration.
- Our No Down Payment Mortgage offers 100% financing on loan amounts up to $750,000, and is available to both first-time homeowners and repeat buyers.
- Our First-Time Home Buyer Program allows for down payments of as little as 3% on loan amounts up to $850,000, and features relaxed credit standards for first-time buyers.
There are pros and cons to putting less than 20% down.
Keeping more money in your pocket may seem like a no-brainer. But there are some things to be aware of. Here's a more comprehensive breakdown of the pros and cons:
- You’ll keep what savings you do have available for other expenses, such as closing costs, movers or household repairs.
- You may be able to buy a home sooner.
- You may be able to buy a home with a higher listing price, assuming you can still afford the monthly payment.
- Your monthly payment will be higher. You can use our Mortgage Calculator to see the difference between putting 0% down and 5% down, for example.
- Your interest rate may be higher. This is because lenders may view loans with low or no down payments as higher risk.
- Depending on the loan type, you may have to pay for private mortgage insurance (PMI). This is a monthly fee added to your principal and interest payment. PMI protects the lender if you fall behind on your payments, which means they’re more willing to lend to you. Keep in mind, however, that it doesn’t protect you or pay your mortgage for you if you fall on hard times.
- You will have little or no equity in your home, so if home prices fall soon after you buy, you could end up “underwater” — meaning you owe more than your home is worth on the market.
No single loan type is right for everyone.
Only you can decide whether the pros of a particular loan outweigh any potential cons. There are a lot of factors to consider, from how much you can afford for a monthly payment, to what the real estate market is like in your area, to what other financial goals you hope to achieve. To learn more, give one of our friendly Home Loan Consultants a call at 760.631.8717 or sign up for one of our upcoming Home Buying workshops.
If you already know what’s right for you and are ready to apply for a mortgage, click here to get started on the path to homeownership!