A 20% down payment is not required! There are two big myths that keep some people fro trying to buy a home. One myth is that you have to put down a minimum of 20% down to buy a home. While a big down payment can be a great way to lower your mortgage payment and convince sellers that you’re serious about buying, coming up with 20% of a home’s purchase price can be difficult. The sad thing is that many people delay purchasing a home and starting to build that all important equity while mistakenly waiting to accumulate that magic 20% down payment.

A Lower Down Payment instead of 20% Down

There are some many other options to a 20% downpayment.  A lower down payment is acceptable. Lenders know that the 20 percent rule is a myth, and will often accept much less if you have good credit and a steady job.

In fact, most people do not put down 20% on a new home.  The average down payment on a home purchase in 2016 was 11 percent, according to a report on aspiring homebuyers by the National Association of REALTORS®.  For first time home borrowers and younger borrowers, the numbers are actually much lower.   For borrowers under age 35, the average down payment was just under 8 percent. The largest share of loans for buyers under 35 were for people putting down less than 5 percent or about $3,500. Coming up with 10 percent down, however, can allow you to have a lower credit score—sometimes as low as 500 for an FHA loan—to qualify.

3% Down Payments Are Common

Lots of people just put down 3 percent.  A few government agencies require only 3 percent or so down. Loan programs backed by Fannie Mae and Freddie Mac require 3 percent down, while the FHA mortgage that targets first-time buyers asks for 3.5 percent down. The FHA mortgage allows the down payment to be a financial gift or from an approved down payment assistance program.

The Fannie Mae HomeReady program allows non-borrowing household members to contribute toward qualifying income. So, if you have an aunt or roommate, their income can be included when qualifying for a home loan.

No Down Payment Options Instead of 20% Down

Besides the three percent or three and a half percent down payment programs, there are no-down-payment options. For example, VA mortgages require no money down for current and former military service members, and most lenders offer them.   USDA home loans also don’t require a down payment. These loans are backed by the U.S. Department of Agriculture, and aren’t for farms but for single-family homes that are in less-dense areas of the country.

Piggyback Loans Are Available

Piggyback loans are available. These require 5 – 10 percent down and are two mortgages that work best for people with good credit. The first mortgage funds 80 percent of the cost and the second is a 10 percent mortgage—the final 10 percent is a down payment. This eliminates the need for mortgage insurance.

Other Assistance Programs

You can find other assistance programs. Down Payment Assistance programs, or DPAs, are run by the government and nonprofits. They offer gifts or no-interest loans to increase homeownership. Nearly 90 percent of all single-family homes in the U.S. are eligible for some kind of DPA.

You Don’t Need Perfect Credit

A second myth is that perfect credit is required to buy a home.  In fact, there are several programs which don’t require perfect credit. The average FICO credit score was 713, but borrowers with a 639 score can still be approved.  People who don’t qualify for such programs can still buy a home with a 639 FICO score, but may need to increase their down payment to 5 percent.

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