Making the minimum down payment of 3.5% for a Federal Housing Administration (FHA) mortgage is possible for all eligible buyers, regardless of their income level. You can even buy a home with no down payment if it meets the specific restrictions of a United States Department of Agriculture (USDA) loan or a Veterans Affairs (VA) loan. However, if you have a credit score between 500 and 579, you'll need to make a 10 percent down payment. In the long run, it may be cheaper to buy a home now than to pay rent while saving for a 20% down payment.
The amount of money needed for a down payment on a home varies, and there isn't even a standard percentage. With VA loans, you'll pay a one-time funding fee, ranging from 1.4 percent to 3.6 percent, depending on the number of VA loans you've obtained and the amount of your down payment. Getting enough cash for a down payment on a home purchase can be the biggest obstacle for prospective homebuyers. However, as long as your mortgage payment doesn't exceed 25% of your monthly net salary on a conventional 15-year fixed-rate loan, you'll be fine.
Government-backed mortgage programs with low or no down payments reduce lenders' risk by guaranteeing a portion of the loans. It's possible to buy a home with as little as 3% down, and you can even buy a home with no down payment if you qualify for a VA or USDA loan. You can use Bankrate's mortgage calculator to get an idea of how different down payment amounts affect your monthly mortgage payment and the interest you can save by investing more money. Saving enough money for a substantial down payment takes time, so the zero or low down payment requirement can accelerate your ability to buy a home.
If you're buying a second home or investment property with a conventional loan, the down payment requirement is usually higher. Maintaining a monthly payment that does not exceed 25% of your net monthly salary can be difficult, but it is possible with careful budgeting and planning. Lenders estimate that if you contribute a fair amount of cash to the agreement, you are less likely to default on the loan and abandon the home, as you would lose your own investment.