Can You Buy a Home with Just 3% Down?

If you've been following along in this series, you've already learned how much money you'll need to buy a home and how your credit score can affect your loan options.

Now let's tackle one of the biggest misconceptions about buying a home.

Do you really need 20% down?

For many first-time buyers, the answer is no.

Where Did the 20% Myth Come From?

Years ago, putting 20% down was much more common.

Today, there are several loan programs that allow qualified buyers to purchase a home with a much smaller down payment.

While putting 20% down can help you avoid private mortgage insurance (PMI), it's far from the only path to homeownership.

Loan Programs That May Require Less Down

Depending on your financial situation, you may qualify for:

Conventional Loans

Some conventional loan programs allow qualified first-time buyers to purchase a home with as little as 3% down.

FHA Loans

FHA loans often require 3.5% down and may be a good option for buyers who are building their credit or have a smaller down payment saved.

VA Loans

Eligible veterans, active-duty service members, and certain surviving spouses may qualify for loans with no down payment.

USDA Loans

Some homes located in eligible rural areas may qualify for 100% financing, meaning no down payment is required.

Many communities in and around Northern Colorado may qualify, depending on location and eligibility requirements.

Should You Put More Down?

Not necessarily.

A larger down payment can:

• Reduce your monthly payment.
• Lower the amount you borrow.
• Potentially eliminate PMI.

However, draining your savings to make a larger down payment isn't always the best financial decision.

Owning a home comes with unexpected expenses, so it's important to keep an emergency fund after closing.

Remember the Other Costs

Even if your down payment is relatively small, you'll still want to budget for:

• Closing costs
• Home inspection
• Appraisal
• Moving expenses
• Utility setup
• Immediate home projects

Buying a home is about more than just the down payment.

The Best Down Payment Is the One That Fits Your Situation

Every buyer's financial picture is different.

For some people, waiting another year to save a larger down payment makes sense.

For others, buying sooner with a smaller down payment may help them start building equity earlier.

There's no single right answer.

Final Thoughts

The idea that you need 20% down has kept many people from exploring homeownership.

The truth is, there are several paths that may require much less.

Speaking with a knowledgeable lender is the best way to learn which loan programs fit your situation and what your next steps might be.

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Related Articles

• Week 1: Is Now a Good Time to Buy a Home in Northern Colorado? 
• Week 2: How Much Money Do You Really Need to Buy Your First Home in Colorado? 
• Week 3: What Credit Score Do You Need to Buy a House in Colorado? 

Next Week

Now that we've covered credit scores and down payments, it's time to take a step back and look at the bigger picture.

Next week: How to Know If You're Financially Ready to Buy Your First Home.