Home Buying Myths Explained: Myth 5 - A Buyer Must Put Down 20% to Secure a Loan

Posted by Leo Clark. on Wednesday, October 8th, 2014 at 9:41am.

Home Buying Myth: A Home Buyer Must Put 20% Down

We’ve all heard various claims about buyers needing at least 20% down in order to secure a loan for their new home or condo, and traditionally, this has more or less been the case. But like most things, the mortgage industry has changed significantly over the years, and as home values have continued to rise in recent years, the need for innovative and creative loan products has drastically increased.
A number of government-backed loans, such as those from the Federal Housing Administration (FHA) for example, allow for as little as 3% down, but can be somewhat more difficult to secure. Borrowers with a strong credit and income history are eligible for a FHA loan, but there’s certainly a few extra layers of terms and conditions before such loans are approved.   

As a home buyer, it’s always important not to get caught up in a situation that enables you to put less money down, however. A smaller down payment always means larger monthly payments, not to mention interest payments can sometimes increase throughout the life of the loan. Buying a home with less than 20% down can be a smart and savvy way to enter home ownership for the first time, but consulting a mortgage broker or banker is always recommended prior to making any final decisions on how to move forward purchasing a home.

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