There’s no question about it:  Buying a first home is a big 
financial commitment.  In most cases, a home is the largest 
single purchase an individual or family will make in a lifetime. 
 However, because of the tax advantages afforded to homeowners, 
buying a home also can be one of the best financial decisions 
you’ll ever make.

Problem is, many would-be homeowners remain renters simply 
because they mistakenly believe mortgage lenders require that 
buyers come up with 20 percent of the purchase price as a down 
payment.  While it is true lenders feel it is less risky to work 
with buyers who are able to bring a substantial down payment to 
the table, the standard 20 percent requirement is fast becoming 
a relic of the past.  In recent years, lenders have become more 
flexible in working with first-time homebuyers by creating a 
variety of special programs that require only a small down 
payment.  These programs, combined with the most favorable 
interest rates in two decades, have encouraged growing numbers 
of renters to consider the tremendous benefits of home ownership.

While the list of programs offered by individual lenders is too 
extensive to mention in detail, here are some common programs 
you are likely to come across as you work with your real estate 
agent to purchase your first home:

Federal Housing Administration (FHA):  FHS mortgages allow 
   homebuyers to purchase a home with as little as a 5 percent 
   down payment, and to finance all non-recurring closing costs. 
   In addition, borrowers are allowed to use up to 41 percent 
   of their gross income toward paying mortgage debt – well 
   above the ratio allowed under most private programs.

Department of Veterans Affairs (VA): VA mortgages allow veteran 
   or active service personnel purchase home with no down 
   payment.  However, there is no purchase price limitation for 
   buyers able to make a down payment.  Like the FHA program, 
   VA borrowers can put up to 41 percent of gross income toward 
   their mortgage debt.

Mortgage Revenue Bonds and Mortgage Credit Certificates:  
   Mortgages funded with these instruments typically require a 
   minimum of 5 percent down and have interest rates that are 
   1.5 to 2 percentage points below conventional 30-year fixed 
   rates.  These types of loans, offered by state and local 
   housing agencies, are available only to first-time homebuyers.
   There generally are income and purchase price caps that vary, 
   depending on where you plan to buy.

Private Mortgage Insurance: Most major lenders offer privately 
   insured mortgages, which generally require a 10 percent down 
   payment (although some lenders offer loans with a 5 percent 
   down payment to buyers with exceptional credit).  These loans 
   typically are not limited by maximum loan amount or purchase 
   price limitation.

Community Homebuyer Program:  Through their networks of mortgage 
   lenders, the Federal National Mortgage Association (Fannie 
   Mae) and the Federal Home Loan Mortgage Corporation (Freddie 
   Mac) offer Community Homebuyer Program loans.  These programs 
   require a 5 percent down payment, 3 percent of which may be 
   a gift.  To further help buyers qualify, applicants may use 
   38 percent of their gross income. 

Clearly, there are a lot of options for first-time homebuyers.  
While lenders will be more than happy to share information about 
their own programs, you can save yourself a good deal of time 
by first selecting a professional real estate agent who is 
experienced in working with first-time buyers in the areas 
where you plan to buy.

An agent who focuses on first-time buyers will know from 
experience which lenders in your area offer a low down payment 
program that will meet your unique needs.

Today, taking the first step toward owning your own home is 
easier than before.  Your real estate agent is your best 
resource for finding innovative ways to help you come up with 
a down payment and qualify for financing.  There’s certainly no 
need to wait until you’ve saved a 20 percent down payment!