To put it simply, no you do not. But most people don’t want simple answers when it comes to buying a home as it’s typically the biggest financial purchase they make in their entire lives. The down payment can vary depending on your home, the location, the time of purchase amongst many other things, so it’s always a good idea to look at your options before thinking you can’t afford a home just because you don’t have the standard down payment.

Loan Type Matters

The first thing you should think about when it comes to a down payment is the type of loan you are seeking. If you are looking at attaining a VA loan for example, you may not have to provide any down payment at all while with an FHA loan you may only be asked to pay as littles as 3.5%.

Once you’ve decided you want to buy and have committed to saving as much as possible, you still may find it difficult to get to a substantial amount of the home value that you think would be a good down payment. This is more common than you would think but luckily there are plenty of other options available to get your down payment together.

Family Gift

Although this option is not available for most, it is for some, and that is to get a gift of funds from a family member. If you have a family member that is willing to help you out with your down payment, they can write a gift letter to your lender in order to help you qualify. Depending on your lender, they may require proof of the funds along with the letter so you would need to discuss the protocol directly with them.

401k Borrowing

Another more popular way people come up with funds for their down payment is to borrow from their 401k. If you have a retirement account, you can use up to 50% of the balance, but keep in mind you will have to repay this amount and that may include interest.

Employer Assistance

If you’ve been with your company for an extended amount of time, it might be a good idea to check with your Human Resources department to see if they have any down payment assistance options available. Even if you work for a smaller company, you should still check to see if they have something in this realm available.

Your Community Can Help

Don’t be afraid to reach out to your community as well. There are urban development communities and other similar programs that help professionals that serve their communities when they are looking to buy a home. If you are a teacher, health care worker, or police officer, you may have options available through local or federal programs.

Reach Out Today!

If you are in the market for a home but thinking about the down payment is holding you back, don’t let it. You have plenty of choices available that can work with your financial situation and get you in a home before you know it. Give us a call at North Star Mortgage today!