You can learn how to buy a house with no money down, but there are also 3%, 3.5%, or 5% down payment options available. A lower down payment may be able to help you buy a home sooner.
3 percent down mortgage options. Mortgages that only require a 3 percent down payment are often part of a special program, and they're open to anyone who meets the program requirements.
“Well, $3,000 is not enough for a down payment on most houses,” says Jill Gonzalez, an analyst with WalletHub. “The lowest percentage of down payment required is 3.5% for an FHA loan. So $3,000 would be enough for an approximately $85,000 loan, although that's way below today's median home price.”
It could be, but it depends on the home sales price and which mortgage loan program you're using. With a conventional loan, you need at least 3% of the purchase price to qualify, so a $10,000 down payment would only work on a home priced at $333,000 or less (333,000 x 0.03 is $9,990).
On a $40,000 salary, you could potentially afford a house worth between $100,000 to $140,000, depending on your specific financial situation and local market conditions. While this may limit your options in many urban areas, there are still markets where homeownership is achievable at this income level.
How much is the down payment for a $300K house? You'll need a down payment of $9,000, or 3 percent, if you're buying a $300K house with a conventional loan. Meanwhile, an FHA loan requires a slightly higher down payment of $10,500, which is 3.5 percent of the purchase price.
Conventional loans are most often but not always conforming loans, and they're considered the most common mortgage option. The minimum down payment for a conventional mortgage loan is 3% of the purchase price if you're a first-time home buyer, and it's 5% for repeat buyers.
On a $200,000, 30-year mortgage with a 6% fixed interest rate, your monthly payment would come out to $1,199 — not including taxes or insurance. But this can vary greatly depending on your insurance policy, loan type, down payment size, and other factors.
An FHA loan is a type of mortgage insured by the Federal Housing Administration (FHA), which is overseen by the U.S. Department of Housing and Urban Development (HUD). While the government insures these loans, they're underwritten and funded by FHA mortgage lenders. Many big banks and other types of lenders offer them.
The Rule: 3 / The value of the house should not be more than 3 times your annual earnings. 20 / The Home Loan tenure should be less than 20 years. 30 / The sum of all EMIs that you pay must be less than 30% of your monthly income.
For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price.
The two main types of loans that don't usually require a down payment are VA loans and USDA loans. Some alternatives to no-down payment mortgages include low-down payment loans, such as a conventional or FHA loan, down payment assistance and gift funds.
You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.
To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually. (This is an estimated example.)
With $2,000 per month to spend on your mortgage payment, you are likely to qualify for a home with a purchase price between $250,000 to $300,000, said Matt Ward, a real estate agent in Nashville. Ward also points out that other financial factors will impact your home purchase budget.
To determine how much rent to charge a tenant, many landlords use the 1% rule — which suggests charging 1% of the home's value for rent. For example, a home valued at $220,000 would rent for $2,200 per month.
If your down payment is less than 20%, you have to pay a monthly fee for private mortgage insurance (PMI)—a type of insurance that protects your lender if you stop making payments on your loan. PMI can cost anywhere from 0.19–1.86% of your total annual loan amount and is added to your mortgage payment each month.
If your house-to-be appraises for exactly the cost to build, you'll be able to get a loan for 80% of the cost… and you'll need the other 20% in cash. However, with a bank willing to loan 80% of appraised value (NOT just 80% of cost), you can borrow more if the appraised value is higher than the cost to build.
Even though interest rates are still high, it's a great time to buy a house. The higher interest rates have priced some buyers out of the market, which means you could face less competition when you make offers. Plus, if interest rates do eventually go down significantly, you can always refinance to get the lower rate.
The house you can afford on a $70,000 income will likely be between $290,000 to $360,000. However, your home-buying budget depends on quite a few financial factors — not just your salary.
Federal Housing Administration (FHA) loans need at least a 580 FICO Score with at least a 3.5% down payment (which amounts to $10,500 on a $300,000 home). Conventional loans require a minimum FICO® Score of 620 along with a 3% down payment (which amounts to $9,000 on a $300,000 home).