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Saving a 20% down payment is simply unrealistic for many homebuyers. Luckily, there are numerous mortgages that require only a 5% or lower down payment. You may have to pay private mortgage insurance (PMI), but a low or no down payment mortgage can get you into the property market faster.
If you can’t come up with a big down payment, you don’t have to give up on buying a home. There are programs available for homebuyers with less than 5% to put down on a home.
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:
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 adds 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. 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.
A home is the biggest purchase most of us will make in a lifetime. But surprisingly, 50% of homebuyers don’t shop around for mortgages, and 75% only apply with one lender. This is a costly mistake that could mean paying thousands more in interest over the long run.
To save money, experts recommend getting at least three or four different loan estimates so you can compare rates and fees. A loan estimate breaks down all the costs associated with the loan, including the interest rate, rate locks, prepayment penalties and the monthly payment.
Request as many loan estimates as you want within a 45-day time frame, and it only counts as one credit check — minimizing the impact on your credit score. Get started by comparing lenders now.
It’s possible to buy a property without saving up a 20% down payment. But most lenders require at least 5% down.
In other words, they’ll 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:
Using our comparison table, 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 See rates 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 this 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 lower interest rates and the most features, your best bet is to save up a 20% down payment. Unfortunately, that’s simply 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.
Learn about Interfirst’s $0-origination-fee mortgages.
Also known as a second mortgage, this type of loan turns your home’s equity into a lump sum of cash.
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