Purchasing a Property without Putting 20 Percent Down

A lot of people who are interested in buying a home start to worry about their finances after hearing they need to provide a 20 percent down payment on the property. However, it is often possible to purchase a loft, penthouse, or condo in downtown San Diego without a massive down payment. Though 20 percent may be the recommended amount of down payment for a property, it is not a requirement. Use these tips to lower your down payment so you can buy a property without having to save up as much.

Look into Government Loans 

The best way to get a smaller down payment is to go with a government-backed loan. Lenders are more willing to accept a lower down payment when the government is insuring the loan. For example, Veterans Affairs mortgages do not require any down payment and Federal Housing Administration mortgages only require a 3.5 percent down payment. Keep in mind you might have to meet qualifications like being a veteran or finding a government approved lender, but if you can get one of these loans, they are very helpful.

Get a Piggyback Mortgage

As long as you can make a down payment of at least 10 percent, you can try a piggyback mortgage, which is technically two mortgages. Your down payment would cover roughly 10 percent of the purchase, the main mortgage covers about 80 percent of the loan, and the secondary mortgage covers the remaining 10 percent. Due to the shifting housing market, more and more lenders are allowing this type of mortgage lately. It can include a bit of extra hassle and paperwork, but you normally do not need to pay for an appraisal, title insurance, or other required fees twice.

Find Down Payment Assistance Programs

With down payment assistance programs, you can essentially get a low or no interest loan for the down payment, which allows you to agree to a higher down payment without having to offer your own money as the down payment at the time of closing. There are both government run and nonprofit agencies that offer down payment assistance as a way of boosting home ownership.

Pay for Private Mortgage Insurance

If you cannot make a high down payment, you may find that lending institutions want you to pay for private mortgage insurance, which protects the lender if you default on your loan. The rates for private mortgage insurance tend to be calculated based on credit score, so this is normally only a good option for buyers who have an excellent credit score of over 760.

Before beginning your search for real estate in downtown San Diego, determine how much you can afford for a down payment. When you’re ready to start looking at the many great condos, lofts, and penthouses in the area, get in touch with the reliable agents at 92101 Urban Living. Give us a call at 619-649-0368.

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