For many prospective homebuyers, the idea that a 20% down payment is necessary to buy a home has become deeply ingrained. This dates back to older lending practices, when lenders required larger down payments to mitigate risk. However, in today's market, this notion is not only outdated but can also deter individuals and families from homeownership entirely. In reality, many aspiring homeowners can purchase a home with less than 20% down.
We outline the different financing options and programs that can help you secure a mortgage If you want to buy a home but can't make a 20% down payment.
A Down Payment Of Less Than 20% Is Common
Alternate Down Payment Options
Historically, you'd set aside at least 20% of a home's purchase price as a down payment before starting your homeownership journey. However, saving that much can be challenging. The good news is that several down payment options can help qualified borrowers turn the dream of homeownership into reality.
- FHA Loans: Federal Housing Administration (FHA) loans are government-backed and designed to make homeownership more attainable for a wider array of buyers, especially those who may have trouble securing traditional financing. FHA loans, which are offered by Ameris Bank to qualifying borrowers, offer several key benefits including a down payment requirement as low as 3.5% of the home's appraised value.
Another benefit of FHA loans is their more flexible qualifying requirements. Some borrowers can qualify with limited savings and slightly lower credit scores.
- USDA Loans: USDA loans are government-backed, require no down payment and up to 100% of the appraised home value can be financed. If you want to buy a home in an eligible rural area or select suburban region that meets the lending criteria set forth by the U.S. Department of Agriculture (USDA), and you might want to consider a USDA loan.
By eliminating the down payment requirement, USDA loans make homeownership more attainable.
- VA Loans: With a VA Loan qualified borrowers can buy a home or condo with no down payment and no monthly mortgage insurance. This loan is available to active-duty personnel, veterans, reservists and eligible family members.
- Down Payment Assistance Programs*: There are a variety of down payment assistance programs that make homeownership more affordable by covering some or all of the buyer's down payment and closing costs. These programs serve individuals and families nationwide and are managed and funded by state and local agencies.
Each program has set eligibility criteria based on factors such as income levels, credit scores, geographic location and whether the individual (or family) is a first-time homebuyer. These down payment assistance programs usually provide funds through first-time buyer grants, matched savings plans or low-interest home loans.
If you are interested in a down payment assistance program and want to see if you qualify, contact Ameris Bank.
Ameris Bank offers several other down payment assistance programs to qualified borrowers:
- Ameris Choice: This program provides qualified borrowers with up to $20,000 in assistance to purchase a new home or refinance an existing one. Borrowers can use the funds alongside a conventional loan, a Federal Housing Administration (FHA) mortgage or a U.S. Department of Veterans Affairs (VA) mortgage. Eligible expenses include the down payment, closing costs or a permanent interest rate buydown.
- Ameris Down Payment Grant Program: With this program, qualified first-time homebuyers can receive a grant of up to 4% of the purchase price, up to $6,000. This grant can be used toward the down payment and closing costs through the Ameris Down Payment Grant Program. Please note that funds are only eligible for use with a Fannie Mae® HomeReady or Freddie Mac® Home Possible first mortgage program originated through Ameris.
- Ameris Dream: This program provides loans for eligible first-time homebuyers who contribute at least $500 to the down payment. Up to 100% financing is available and no private mortgage insurance (PMI) is required.
- Conventional 97 Loan: A Conventional 97 Loan lets first-time homebuyers and those who haven't owned a residential property in the past three years finance up to 97% of the home's value with a 3% down payment. This makes it an appealing option for homebuyers who do not have enough cash for a larger down payment. Borrowers may qualify for a Conventional 97 Loan from Ameris Bank if they meet the eligibility requirements.
For many years, the common belief has been that a 20% down payment is necessary to purchase a house. However, today you may find you need less than you think, thanks to alternative down payment options and down payment assistance programs.
