Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Saving a 20% down payment just isn’t realistic for many homebuyers. Luckily there are plenty of mortgages you can get with just a 5% or lower down payment. You may have to pay private mortgage insurance (PMI), but a 95% mortgage can get you into the property market faster.
It is possible to buy a property without saving up a 20% down payment. But most lenders require at least 5% down. In other words, they will lend you 95% of a property’s costs, but that 5% needs to be money you’ve saved. This is often defined as money that’s been sitting in your account for at least six months. But there are ways around this:
If you can’t come up with a 5% down payment, don’t give up on buying a home. There are programs available for home buyers with less than 5% to put down on a home.
Most home loans require a 20% down payment. But some products have a minimum down payment of as low as 3%. This means you can forget the 20% and buy your property with a smaller down payment.
There’s only one catch. Getting a loan with less than 20% down means you’ll have to pay private mortgage insurance (PMI). This is an extra cost that protects your lender, not you, in case you can’t repay your debt. It’s a cost that add up to thousands of dollars, especially if you’re borrowing 95% of a property’s value.
Before considering getting a loan with a 5% down payment, calculate how much PMI will add to your costs. Keep in mind that while PMI costs can be rolled into your mortgage payments (meaning you can borrow this sum along with the money needed to buy a property), it will affect how much you can borrow.
Aside from PMI costs you should be aware that some 95% mortgages come with higher fees or a less competitive interest rate. But because the mortgage market is so competitive, you can find many loans that keep fees and interest rates low, even when lending you most of a property’s value. The table above is filled with such products, but be sure to read the fine print on fees and features when comparing.
Getting a loan with such a small down payment inevitably means paying more in interest over time. The difference in interest you’ll pay over the life of the loan can be significant. Here’s an example:
Using the table above you can sort through loans with 5% down payments and read reviews of the various products and lenders. Look at the fees, flexibility and features the loans come with to get a better idea of which ones work for you.
When you’ve found a product you’re interested in, hit the green button and you’ll be taken to either a website or a form where you can add your details and get in touch with a mortgage expert. They’ll guide you through the application process.
To make the process easier you’ll need to meet the following requirements:
Once you meet the above criteria, you’re ready to proceed with your application. It’s important to ensure you have the following information and documents ready:
If you want a mortgage with the lowest interest rates and the most features, your best bet is to save up a 20% down payment. Unfortunately, that’s just not realistic for everyone. Luckily, if you have good credit and are willing to pay a little extra for mortgage insurance, you can get a home with only 5% down.
Image: Shutterstock
Get a low rate guarantee, but you won’t know if you’re eligible until you apply.
Get a line of credit with low closing costs — but you can’t apply online.
Want to buy bitcoin but don’t know where to start? This comprehensive guide provides step-by-step instructions on how and where to buy BTC in the US.
Offers reduced-rate, no-closing-cost HELOCs, but only in specific states.
Get low rates with minimal fees — if you qualify for its limited membership.
Offers no annual fee, discounted HELOCs — but locations are limited.
Take control of your money stress by learning to prioritise and plan your financial goals.
Refinancing your mortgage while unemployed is challenging, but it may be possible if you have an alternative means to repay the loan.
You won’t find rewards on this store card.
What you need to know to start building your retirement nest egg.
