Traditional wisdom holds that you need 20 percent of a home’s sales price as a down payment… but when you’re buying a $500,000 home, that equals $100,000.


And if you’re like most people, you don’t have $100,000 sitting around.


So how do you make it work?


Do You Really Need a 20% Down Payment to Buy a Home?


There are a few federal programs that let you buy a home with less than 20 percent down:


  • VA loans, but you must be an honorably discharged or currently serving member of the U.S. Armed Forces (or a qualifying dependent) to be eligible. These are zero-down loans that don’t require you to pay for private mortgage insurance.
  • Fannie Mae and Freddie Mac loans with low down payments, such as HomeReady™ and Home Possible® Advantage, or programs that only require a 5 percent down payment.
  • FHA mortgages that require 3.5 percent down. Buyers must have credit scores of 580 or higher to be eligible for the 3.5 percent down payment; those with credit scores below 580 can still be eligible for an FHA loan, but will have to put 10 percent down.
  • Good Neighbor Next Door programs run by the Department of Housing and Urban Development, which are available to law enforcement professionals, emergency medical technicians, firefighters and teachers. If the home you’re buying is in a “revitalization area,” you could be eligible for a discount of up to 50 percent on a home’s listed price (thanks to HUD subsidies).


You can also use a conventional loan if you have 5 percent down, but you’ll likely have to pay for private mortgage insurance, or PMI, until you’ve built 80 percent equity in your home.


Down Payment Assistance


Some people are eligible for down payment assistance, which comes by way of a one-time grant or a loan. It’s important to know that you’re considered a “first-time home buyer” if you haven’t owned a home within the past three years (even if you owned one before that).


Here are a few down payment assistance programs available to people in Lakewood and Long Beach:


  • Cal-EEM + GRANT Loan program, which can give you up to 4 percent of the first mortgage’s total loan amount to use as a down payment, provided that you’re making energy efficient improvements.
  • Extra Credit Teacher Home Purchase Program (ECTP), which is available to teachers, administrators, school district employees and staff members at any California K-12 public school, charter school, or county or continuation school. The ECTP can lend you between $7,500 and $15,000.


You can also talk to your lender about down payment assistance programs that could help you.

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