Can I Qualify for a mortgage with limited savings?
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I see way too many press reports suggesting a 20% down payment is the norm for home financing. Actually, the average down payment is less than 10%, and it's possible to buy a home with no down payment at all. Let's look at the loan options and see how far we can stretch a small savings account.
The no down payment options are the VA and USDA Rural Development loans, but both are restricted programs. You must be a current service member or veteran to qualify for the VA program. The USDA program is available to anyone; however, it has income limits, and only homes outside urban centers are eligible.
Among loan programs without restrictions, the lowest down payment at 3% is a conventional loan. The minimum down payment for an FHA loan is 3.5%.
Your down payment is just part of the funds you need to bring to closing. You also need to account for closing costs and pre-paids expenses, and we're going to cover those next time.