(BPT) - Buying a home is one of life's biggest financial milestones, but people often think it's out of reach because of the costs involved, including the myth that you have to put 20% down. The fact is, you don't necessarily need to deplete all of your savings to qualify for a mortgage and you can purchase a home sooner than many people believe.
You aren't alone in thinking you can't afford a home right now. According to a recent report, 49% of non-homeowners stated that not having enough money for a down payment and closing costs was a major obstacle to purchasing a home. But when you look at the data, many aspiring homebuyers can afford to buy a home with less than 20%. In fact, another recent survey found that among first-time homebuyers who obtained a mortgage, approximately 80% had down payments of less than 20%.
There are several low down payment mortgage options available to you, such as conventional loans with private mortgage insurance (MI) or government-backed loans like those insured by the Federal Housing Administration (FHA).
For example, a qualified borrower can get a conventional loan with private MI for as little as 3% down. If he or she waited to save for a 20% down payment, it could take up to 20 years to save that amount, plus closing costs, for a $262,250 house - the national median sales price in 2018, according to the National Association of REALTORS(R). That wait time is trimmed down to seven years when buying a home with 5% down, where the loan is sustainably backed by private MI. Purchasing a home with less down using private MI can also help ensure you continue to have prudent savings, and can free up funds that you can use for other important home purchases - such as renovations, appliances and furniture.
There are other mortgage options available to you as well, such as government-backed FHA loans that allow you to put down as little as 3.5%. However, unlike private MI, which can be canceled once you reach 20% equity in your home, the mortgage insurance premiums attached to FHA loans typically can't be canceled and remain throughout the life of the loan.
It's important to know what home loan option is best for you, and you should speak with a mortgage lender to help inform your decision. The bottom line, however, is that there are affordable low down payment home loan options out there, which could mean the difference between getting into your home sooner, allowing you to build wealth through home equity, or waiting for years while renting. By taking advantage of home loans backed by private MI, you can spend less time worrying about a down payment and more time enjoying your new home.
Getting into your new home with private MI and keeping more of your hard-earned money in the bank can be a very smart way to invest in your future. Check out www.LowDownPaymentFacts.com to learn more.