Did you know you don't need 20% as a down payment to purchase a home?

A big misconception that I've found from talking to people about purchasing real estate is that you need to have a 20% down payment to be able to purchase a home. Let me tell you... that is NOT the case! There are so many different loan options and down payment options where you can get a home for as little as 3% down!

Let's start with talking about Conventional Loans. Conventional loans are types of mortgage loans that are not insured or guaranteed by the government. The loan is backed by private lenders like banks, credit unions, or other financial institutions, and its insurance is usually paid by the borrower. Most lenders look at a credit score of 660 or above for a conventional loan, but your interest rate will depend mostly on your credit score and your overall credit history. Most lenders will offer a conventional loan with as little as 3% down payment! However, if you are putting that little down with a conventional loan, you will have to pay mortgage insurance every month. (Mortgage insurance: basically what it sounds like. A payment tacked on to your monthly payments to insure the lender that you will be making your payments.) Once you have acquired 20% equity in your home, that mortgage insurance will fall off your payments!

Next is an FHA loan. A FHA loans are government backed loans. An FHA loan only requires a 3.5% down payment if you have a credit score of about 580. This is a good option if you maybe don't have the highest credit, but are still looking to purchase a home. That mortgage insurance is required with an FHA loan!

A USDA loan is insured by the US Department of Agriculture and is for people who meet the requirements and want to purchase a home in an eligible "rural" area. USDA's definition of rural however, is pretty generous. With a USDA loan, they offer 100% financing so NO DOWN PAYMENT. This is of course if you meet the income requirements (meaning you don't make too high of income) and the credit requirements. This one also requires that mortgage insurance.

Finally, a VA loan is an option if you are a military veteran, spouse of someone in the military, and even in some cases a beneficiary of a veteran. This loan is backed by the US Department of Veterans Affairs. This loan offers 100% financing as well! With this loan, their is no mortgage insurance and awesome interest rates offered!

Moral of the story, there are many options for you if you are thinking about buying a home but don't have that 20% saved for a down payment. I highly recommend speaking to a real estate professional, and letting them guide you to a trusted lender to speak about your options based on your personal situation. Take advantage of these low interest rates right now! They are projected to stay around 3% this year. With the low interest rates, and the options for loans, there is no excuse not to invest in real estate this year!