Alternatives to Putting 20 Percent Down on a Home

With the average home in the United States costing $311,400 as of the end of last year, according to the Census Bureau, raising the usual 20 percent down payment has become quite difficult for many. Fortunately, more and more banks and lenders are requiring less. “Putting less than 20 percent is OK with most banks,” confirms Pepe Real Estate President Christopher Pepe. So why are many buyers still being told they need to put 20 percent down? Because if they don’t, it usually means they will have to pay for either private mortgage insurance (PMI) or FHA-financed government insurance that protects the lender in case the borrower cannot make payments and the house is foreclosed on. Fortunately, PMI payments do not last forever. When the borrower’s loan-to-value ratio is 80 percent, he or she can ask the lender to be released from paying PMI. At 78 percent, the lender is required to cancel it. Those who really want a house and are looking for alternatives to putting down 20 percent must figure out financing prior to beginning their home search. There are a number of programs that will help you purchase a residence without such a hefty down payment, notes Dan Smith, president of Private Mortgage Solutions in Atlanta. However, he states, “All of these programs have various lender, property and borrower qualify requirements and restrictions.” He and others advise to try your own bank first, especially if you have a good relationship. Amanda Monette, a real estate lending officer with Rockford Bank & Trust in Illinois, states, “You may have a better shot of getting a loan, even if you don’t have the money for a down payment.” | Read More