NEW YORK (MainStreet) Rachel Wolfinbarger knows that the myth that a 20% downpayment is needed to buy a home today is just a myth. That's because this California blogger last year bought a $255,000 Rancho Cucamonga home for $255,000 and put down just 3.5% to get a mortgage backed by the Federal Housing Administration (FHA).
Even sweeter, her house has had substantial appreciation in the hot Southern California housing market. Said Wolfinbarger: "I couldn't think of a better scenario--having over 20% worth of equity within about a year when we only put down about 3%."
She's not alone. Buyers in the tends of thousands are discovering that in 2013 there are plentiful ways to buy a home with little savings.
Other buyers, with cash in their pockets, are skimping on downpayments, because they would rather borrow plenty at today's historically low rates,
Cross country in East Harlem, banker Michael Germano just bought a four-family townhome at 117th and 1st for a price in the low seven figures, and he did it with around 10% down, not the traditional 20%. He explained his thinking: "Mortgage rates are so low, why not take advantage of it? I can generate more of a return for my money in other investments."
"There are many options for buyers who want to put little or nothing down," said Michael Moskowitz, president of Equity Now, a New York City-based direct mortgage lender. His firm advice for house hunters who want to go this route: "Only work with mortgage brokers who can show you multiple options. Some sell only one product, and that won't be best for all buyers."
Moskowitz, for instance, is himself not a fan of FHA low-down loans ("they are too expensive," he said). but he very much likes Veterans Administration (VA) no downpayment loans, which get even better for disabled vets.