If you’re thinking of buying a home, you’ve probably heard how important the downpayment is. The common advice is to give at least 20 percent down in order to ensure you’re in good financial standing. While this is certainly true, it is possible to buy a home with less than 20 percent down.


As mortgage rates fall below traditional levels, more and more people are striking the market while it’s hot. This is a smart move for many homebuyers, whether it’s your first time buying or you’re an experienced buyer. These low interest rates are welcoming more buyers who aren’t able to make that 20 percent downpayment, and this is a good thing.


If you don’t have a 20 percent down payment, you can still buy a home! In this guide, we’ll explore how exactly to buy a home with less than 20 percent down.



Home building | under 20 percent down



Why Put 20 Percent Down

First, let’s talk about why putting 20 percent down is the norm and the benefits of putting this much down. When you put down 20 percent, you take out a smaller mortgage on your home, and your lender will feel more secure in your loan.


Here are the main benefits of putting 20 percent down:

  • Lower mortgage payment – In general, paying more for your downpayment will give you more flexibility with your mortgage payment and terms. You’ll likely save more each month.
  • PMI – If you put 20 percent or more down, you won’t need to purchase Private Mortgage Insurance (PMI). This will save you even more.


While it’s true there are many benefits of putting down 20 percent on your home, it’s not necessary. There are a lot of affordable options for those who want to buy a house without a large downpayment!



Options For Buying a Home Without 20 Percent Down

The average down payment for first-time homebuyers in 2016 was 6%. The “20 percent downpayment myth” is crudely passed around, discouraging first-time buyers from entering the housing market.


To debunk the 20 percent myth once and for all, here are different ways to buy a house without a large down payment:


  • FHA Mortgage – The easiest way to avoid a large down payment is with an FHA mortgage. This is part of the government’s Housing and Urban Development agency. While the FHA only insures these mortgages (it doesn’t make them), you only need a 3.5% downpayment.
  • VA Loan – Another option is through the Department of Veterans Affairs. If you’re a veteran of the U.S. Armed Services, you can access low-cost loan programs which sometimes include 100% financing.
  • Conventional 97 – Restarted in 2014, the Conventional 97 program is for both first-time buyers and repeat buyers. If you have an above-average credit score, you only need a 3% downpayment.
  • Rural Home Loan – Finally, if you’re purchasing a home in a “rural” area (anywhere deemed rural by the USDA), you could be eligible for no money down on your loan.



Skip the Downpayment on Your New Home

There are a lot of myths about home loans and how much you need to have in the bank to buy a home. While the 20 percent myth is based on some truth, there are a number of legitimate options available for those who might not have a lot to put down on their home mortgage.


Whether you’re a first-time or repeat homebuyer, make sure you’re choosing the mortgage option that’s right for you. From full-financing to 3.5 percent down, know exactly what you’re getting into with this guide.