The Center For Debt Management
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How To Buy A Home
With A Low Down Payment

A Consumer's Guide To Owning a Home
With as Lttle as Five Percent Down

If you're dreaming of buying a home, congratulations. You're in good company! Almost two-thirds of the nation's households own their own home.

This article describes how families can get into their own homes with little cash up front. It explains mortgage insurance and how it works, and looks at the two options — private mortgage insurance and government mortgage insurance.

Why Buy A Home?

Homeownership remains one of the highest goals for many people because of its many benefits. Along with owning your own home comes a sense of security and belonging that cannot be found elsewhere. For many, homeownership represents personal and financial success.

There is much personal satisfaction in living in a home that you own. A home is still a valued investment which can have many financial advantages and tax benefits. The amount of interest you pay on a home loan and the real estate taxes you pay on your home are among the few major federal tax deductions. Owning a home is the primary way most people build wealth.

Homeownership is also good for our communities, because families who own their homes are more involved in their local communities and participate in local events.

The rewards of homeownership:

  • Personal satisfaction
  • Sense of community
  • Tax savings
  • Stability for you and your family
  • Investment in the future

Obstacles To Homeownership

Still, for many Americans, owning a home continues to remain just slightly out of reach. For more and more families, saving the money for a down payment is the biggest obstacle to homeownership. Many people mistakenly believe that you have to come up with a down payment equal to 20% of the price of a home.

Traditionally, lenders have required that home buyers be able to make a down payment of at least 20% of a home's purchase price to get a home loan or mortgage. However, mortgage lenders will grant home loans to qualifying home buyers with a down payment of as little as 3 to 5 percent of the purchase price, if the mortgage is insured.

In fact, home loans with down payments of less than 20% are increasingly popular. They are called "low down payment mortgages."

This is good news for the millions of home buyers who are finding it difficult to save a large down payment, especially for their first house.


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