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If you are unable to make a 20% down payment, there are many lenders that will allow you to make a smaller down payment on a house. Among them is the FHA, which offers mortgages with as little as 3.5% down, if your annual income is under a certain amount that varies by market. There are even some lenders, like the U.S. Department of Agriculture, that allow you to put 0% down, but eligible homes are usually in rural areas, and your income must meet certain low requirements.
Pre-approval requires the lender to pull the credit information (see Step 1) and assess your financial situation. The lender will then give you a letter that states the amount they would be willing to lend you. If you get in a multiple-offer scenario, being pre-approved may give you an edge because the seller will have more confidence that you will be approved for a loan large enough to purchase their home.

The amount you’ll be required to put down on a home depends on the type of loan you get and on the lender’s requirements. Generally, it can be difficult to qualify for a  conventional mortgage loan–one available through or guaranteed by a private lender or either of two government-sponsored entities, Fannie Mae or Freddie Mac–with a down payment of less than 10 percent. Factors including income, cash on hand, credit score and debt-to-income ratio.

If your offer called for a home inspection, this is a big day. Sure, you get to have a home inspector look over the home to make sure there are no unseen defects you want to negotiate to have fixed. But more importantly, this is the most time you’ll get to spend in your new home until closing. Go ahead and start measuring things and figuring out what goes where. This may be the last time you are inside the home until it is yours, several weeks from now.

Knowing you need to set money aside each month is one thing. Actually doing it is another. Set yourself a calendar reminder on the same day each month or pay period to transfer a set amount of money – at least 5% of your take-home pay, and ideally 10% – into your primary savings account. You can then separate the share allotted to your down payment from your general savings or other savings goals. Or, better yet, create a separate savings account whose sole purpose is to hold your down payment funds.
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You might be surprised to find that some private mortgage programs also have low down payment requirements. Most conventional loans have guidelines set by either Freddie Mac or Fannie Mae. Because these loans must conform to this set of guidelines, they are called “conforming” loans. To offset the risk of lending with smaller down payments, conventional lenders require borrowers to purchase private mortgage insurance, or PMI, when they put less than 20 percent down on a home.
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