Here at American Pacific Mortgage, Inc., we get a lot of questions about mortgage down payments in the Tri-Cities area. Many customers are concerned that they will not be able to buy a home because they are unable to afford a 20% down payment.
But not every home purchase needs to involve a 20% down payment. Your mortgage down payment in the Tri-Cities could be significantly less, depending on a variety of factors.
Below are 5 strategies to consider which may help you to lower your down payment on a new home.
- Improve your risk profile. If you are trying to buy a home without a great credit score and debt-to-income ratio, you are going to have a harder time finding low down payment options than you would if you were not setting off red flags. Try to improve these financial metrics before you apply for a loan. Raise your credit score if you can (look at your credit report to see what you need to do here). Try to lower your debts and raise your income so that your debt-to-income ratio improves. There may be other financial metrics worth revisiting as well. The less risky you appear as a borrower, the more willing lenders will be to give you a larger loan comprising a higher percentage of a home’s value. That means a lower down payment.
- Consider paying for private mortgage insurance (PMI). Many people think you can only purchase a home with a conventional mortgage if you are able to afford a 20% down payment—but that is not the case. In truth, one way you can potentially lower that down payment requirement is by agreeing to pay for private mortgage insurance (PMI) each month. While PMI does add a monthly expense, there are situations where it may make financial sense. So, consider that option if you cannot find another way to reduce your Tri-Cities mortgage down payment.
- Check to see if you qualify for an FHA loan, USDA loan, or VA loan. Another excellent way to get around the 20% down payment requirement is to apply for a government-insured loan which carries a lower requirement. You have several options here to look into. First up are FHA loans, which are insured by the Federal Housing Administration. With FHA loans, your down payment could be just 3.5% if you have a minimum credit score of 580. If your credit score is lower than that, you still may qualify for an FHA loan with a 10% down payment. A VA loan may be an option for you if you are an active-duty service member, retired member of the armed forces, or a surviving spouse. Insured by the Department of Veterans Affairs, VA loans have zero down payment and no requirement for PMI. One more possible way to qualify for a zero down payment mortgage in the Tri-Cities is by applying for a USDA loan insured by the US Department of Agriculture. These rural housing loans have many other great benefits as well.
- Find out if there are any local or regional down payment assistance programs that can help you out. Some communities offer down payment assistance to low-income homebuyers. If you are looking to purchase a home in the Shoals region or elsewhere in Alabama, we can help you to investigate whether there are any such options available to you.
- Work with a mortgage company in Florence, AL that won’t give up on you. One last tip for finding a home loan with a low-down payment (or no down payment) is to work with a mortgage company that never gives up trying to find a solution.
At American Pacific Mortgage, Inc., we believe that every homebuyer deserves a chance to attain the American Dream.
No matter what obstacles you may be facing with regards to your down payment, we are here to help you find a way to move into your Tri-Cities dream home. Ready to begin? Call us today at (205) 495-0313.
