Considering Your Options for a Down Payment | Journey Home Lending

Whether you’re looking to buy a home or never considered the possibility, there’s a good chance you’re familiar with the ubiquitous advice that you have at least a 20% down payment. While that remains a good benchmark, it’s one few Americans actually get to before they make a purchase.

Knowing that, what should you do if you find yourself in that majority and are shy of the mark to make by a little or a lot?

Whether you need to make up some ground to meet that best practice or you don’t have anything saved toward a down payment, you do have options for making the down payment on the house you want.

To be sure, there are plenty of good reasons to aim for that 20% mark and, in truth, it’s more than just a recommendation. Having that amount on-hand can make it easier to qualify for loans and secure a more favorable interest rate.

It can also help you avoid the additional expense of private mortgage insurance.

If you aren’t there, though, here are some of the options you might consider to get you there or just to give you enough to make a small down payment on the place you want.

State Programs. Many states offer grant or loan assistance, including no-interest and/or forgivable loans, for first-time home buyers. New buyers add value to the economy of a state and they’re often coming in from other states, which means new tax revenue that more than justifies these programs for the states. Still, there are restrictions on these programs that may be related to income, location and type of property, among other factors.

Personal Loans. While this is the first option that jumps to many people’s minds when they try to come up with solutions in this situation, it’s not always a great one. For starters, personal loans can’t be used for down payments on certain loans. The option also commits you to making two monthly payments and, since the terms of personal loans are usually fairly short, the bill can be significant for this option. Finally, you’ll want to consider how much you’ll pay in interest on a monthly basis and overall on the loan to ensure you won’t end up paying more with this option than you would just taking on the additional mortgage interest and PMI.

Gifts. Obviously not everyone can ask friends, family or romantic partners for 20% of the cost of a home, but for those lucky enough to have acquaintances with that kind of scratch, this is an option. It’s important that you understand the rules governing down payment gifts for the type of loan you’re considering before you secure the money, as some don’t allow down payments that come from gifts. Additionally, you’ll need to be able to provide evidence of the source of the money and may need to prove it’s a gift; person-to-person loans aren’t allowed in most cases for down payments.

If you’re ready to buy or refinance a home, the experts at Journey Home Lending have the knowledge and expertise to help you find the right options for your situation. Give us a call today to get started!