People still seem to fall into the stigma that you have to put at least 20% down on a property in order to buy a home in Metro Detroit.  While putting a larger amount down up front can save you on the back end of your mortgage, it’s not necessary (and certainly not required) to drop 20% when you seek pre-approval with a Michigan mortgage lender.

According to a recent study by Lending Tree, the average mortgage down payment in the U.S. is around 12.25%.  That means a lot of buyers are putting down far less than 20%, and many are putting down well below 12%.

In fact, in the current housing market in Michigan, you can buy a home with a down payment as low as 1.5 – 5%.  There are even programs in place to help some first time buyers get into a home with 0% down.

Qualifying for a VA Mortgage in Michigan

The primary source of zero-down mortgages is through the Veterans Administration with a VA home loan.  To qualify, you have to have either served in the military or be actively enrolled.  What many don’t realize is that non-military persons can even qualify for a VA mortgage, including surviving spouses of veterans, officers of the Public Health Service or National Oceanic and Atmosphere Administration as well as others.

USDA Zero Down Mortgages

If you’re not a Vet and don’t qualify for a VA loan, you can still get a zero0down mortgage through the USDA Rural Development Service.  The catch is that your income can be no more than slightly above average for your region, and you have to be presently without adequate housing.  Also, the home you’re targeting must be in a rural area.  Before shutting the idea down, note that the USDA’s definition of “rural” is fairly broad, and includes small cities, towns and suburbs.

Funds in this program are limited, so it’s best to apply as quickly as possible.  If you miss the window this year, apply quickly at the beginning of the following year.

Low FHA Down Payments

The most popular mortgage program is the FHA, which allows down payments as low as 3.5%.  FHA mortgages traditionally made up only a small portion of real estate transactions – typically for first time buyers and low-income buyers.  The popularity continues to increase however as home values drop and more first-time buyers are surfacing.

Michigan Assistance

There is state assistance to first-time buyers in Michigan that can help bring the down payment to as low as 1.5% of the total cost of the loan.  For a first time buyer on a limited income, this makes it easy to purchase a better home, over $100,000, with as little as $1500.00 down.

Is A Lower Down Payment the Best Option

If you’re seeking preapproval through a Michigan mortgage lender, getting a low down payment can be helpful, but it doesn’t make the process any easier.  In fact, lowering your down payment does equate to higher costs later.

With low down payments, expect to have to pay mortgage insurance (especially with an FHA loan) and your interest rate is likely going to be higher than someone who put down 10-20%.

There are other programs that can help put you in the home of your dreams if you’re ready to buy a home in Metro-Detroit.  Talk with your Michigan mortgage lender today to discuss your options and how we can help you get the mortgage you need at a price you can afford.