The old adage of needing 20% down to buy a home is a relic of the past. You can qualify for more loan programs with a 20% down payment but there are plenty of programs available to help you buy a home before you have saved that much. So let’s talk a little math first! (Don’t worry, it won’t hurt, I promise!)

Let’s say you want to buy a $200,000 home. A 20% down payment would be $40,000. If you could save $500 a month it would take you six and a half years to save the total amount needed for your down payment. Of course during that time you would be paying rent, at $1000 a month that would be $108,000! House prices would be rising during that time as well meaning you would need a larger down payment by the end of the 6.5 years. Currently the average household income for Winchester VA residents is $44,000 a year, so saving $500 a month is difficult for most families. By taking advantage of other loan programs you can buy more quickly, putting your rent payments to work for you as your mortgage payments instead.

Low Down Payment Options

Conventional loan options are typically what most people think of when buying a home and saving for a down payment. These loans used to only be open to those with 20% down payments but now there are options for lower down payments including 15, 10, 5 or even 3% down. FHA programs are also available with just a 3.5% down payment with a lower credit score needed than conventional loans. There are loan size limits for FHA loans so depending on where you want to buy you may have fewer homes to choose from. The difference in loan limits between Loudoun and Frederick counties is significant, but of course you can buy more house for less in Frederick and Winchester.

Zero Down Payment Options

While many believe zero down payment programs went away, there are still options! USDA offers 100% financing in “rural” areas. What qualifies as rural is of course the key. In Frederick County it is pretty much everywhere except downtown Winchester. You can read more about what credit scores are needed for some of these programs here.

VA loans for Veterans are also another option for no down payment. Vets and current military members have access to loan benefits that avoid some of the fees that borrowers will pay using FHA and USDA options while allowing them to not have to save for a down payment.

Down Payment Grant and Help Options

Loans in this category are a bit different. Some of them like FHA Plus and VHDA loans offer the down payment as a second mortgage. With FHA Plus, instead of paying a 3.5% down payment out of your pocket like a normal FHA loan, they create a second mortgage with the 3.5% so you get 100% financing with zero down payment. VHDA does the same thing except the down payment is a grant and does not need to be repaid. The grant is 2-2.5% so you only need to come up with .5-1% of the home sale price for your down payment.

Locally we also have the Blue Ridge Housing Down Payment Assistance program. Similar to FHA Plus and VHDA programs, the HDPAP down payment assistance program offers a down payment in the form of a second mortgage. The HDPAP program allows the loan to be deferred though, meaning you don’t have to make payments on it and it is zero percent interest, it gets repaid when you either sell the home, transfer ownership, refinance your first mortgage or move into another home. The program does have income guidelines and offers up to 10% for a down payments, so if you qualify it can truly affect your ability to buy a home in a positive way.

There you go, quite a few ways you can buy a home with way less than a 20% down payment! If you have a goal to own a home, reach out so we can help you determine how best to get you into a home.

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