Tips for Buying a House if You Don't Have a Large Down Payment

To buy a house, you may need to have decent credit, steady income, and money to use as a down payment. If you have good credit and steady income but do not have a large down payment, here are some tips to help you understand your options as you prepare to start looking at homes for sale.

Wait a Little Longer

One option you have is to postpone buying a house until a later point, and this is a good option if you want to have more time to save up money. If waiting one year will help you have enough to put down on a house, it might be worthwhile to wait the extra year before you begin house shopping. If you decide to do this, carefully evaluate your budget and find ways to save as much money as possible during this period of time.

Look for an Affordable Home

A second option you have is to drop your original budgeted amount for a house to a lower amount. For example, if you were hoping to buy a house around $200,000, consider shopping for a house that is only around $140,000. There are homes available in all price ranges. If you buy a house that is a lot cheaper to buy, you will not need as much of a down payment when you make the purchase.

Find a Loan That Doesn't Require a Huge Down Payment

There are multiple different types of home loans you can choose from when buying a house. Some options require putting a 20% down payment on a house when buying it, but others have lower requirements.

For example, you could look into an FHA loan. With this option, you could qualify to buy a house with as little as 3.5% down if your credit score is at least 580 or higher. FHA loans offer a lot of benefits to people who do not have a lot of money to use for down payments; however, there are some drawbacks too. One of the main drawbacks is that you will be required to pay mortgage insurance on the loan with an FHA loan. This is something you can avoid with a conventional loan, but a conventional loan will require a 20% down payment.

If you are ready to shop for a home to buy, a good first step is contacting a mortgage lender. Once you are pre-approved for a loan, you can contact a real estate agency to begin shopping for the right home.