How to Buy a Home without 20% Down

Written By Mary Beth Eastman
Last updated November 22, 2019

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December 13, 2018

Simple. Thrifty. Living.

Most people want to own their own home, but saving for a 20% down payment can be incredibly difficult, especially if you have children to support. The median price of a home in the United States is approximately $200,000, meaning a traditional down payment is $40,000. For many, that’s a year’s salary. Fortunately, you do have other options when it comes to financing a home purchase. You can buy a home with less than 20% down.

You may be able to get a low or no down payment loan, usually through a government program. Below are some of these loan types:

  • FHA Loans – These loans are insured by the Federal Housing Administration and require lower down payments – sometimes as low as 3.5% if your credit score is 580 or above. Those with a credit score between 500 -579 may qualify for a 10% loan. If you get one of these loans, you will be required to purchase mortgage insurance to protect the borrower in case you default on the loan. Your interest rate will vary according to your credit history.
  • USDA Loans – This “rural housing loan” is guaranteed by the U.S. Department of Agriculture and is available to those with low to average income for their area. It offers 100% financing, so no down payment is necessary. Also, you may qualify whether you live in the country or in the suburbs since 97% of the US is covered by this loan. A USDA loan also offers lower than average interest rates, so it’s an excellent option to explore.
  • VA Loans – This financing is available only to active-duty service people, honorably discharged veterans, reserve members, National Guard members with a minimum of six years service and spouses of those service members killed while in the line of duty. They require no down payment and no mortgage insurance.

You may also be able to get a bank to offer you a mortgage with less than a 20% down payment, but you will have to pay for mortgage insurance.

Financial advisers usually recommend having a 20% down payment so you do not have the expense of mortgage insurance and so that your loan term is shorter. However, you do have other options if getting together that much cash is too difficult. Be certain to explore all modes of financing, including online loan reviews, so that you can make your dream of home ownership a reality.

Also, it is very important to improve your credit as much as possible before trying to take out a loan. If you need help with credit repair, you can look into some reputable credit repair sites to help you.


About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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