When You Dont Have the Required Down Payment for a Home Mortgage

Most people hope one day to own a home of their own. But for some aspiring home buyers, pulling together the "necessary to qualify" 20 percent home mortgage down payment can be more than a little difficult. Fortunately, there are some options out there for those home buyers who struggle to gather together the full 20 percent. But as is true for pretty much every element in obtaining a home mortgage, each option has its pros and its cons. And depending on the health of the credit markets at the time you are looking for a loan, lenders may be more or less willing to be flexible with the terms of the mortgage.
PMI (Private Mortgage Insurance)
Lenders usually like home buyers to put down at least 20 percent of the purchase price in order to qualify for a home mortgage with the most favorable terms. If you are unable to pull together that large of a down payment, you may be required to purchase Private Mortgage Insurance (PMI). In the case that you cannot pay your mortgage, this insurance will keep the lender from losing money.
Private Mortgage Insurance generally costs 0.5 percent of the purchase price of the property you are buying. If obligated to purchase PMI, the final costs of your home mortgage will be higher than they would otherwise. Fortunately, when you have gained equity in your home (youll need 20 to 22 percent) you can request that the PMI be cancelled.
A variation on this arrangement is an FHA loan, which will be insured by the government. With a government insured FHA loan, you may be able to qualify for a mortgage with a down payment of just 3 percent or more. These government insured loans require specific standards be met in order to qualify, and these standards can vary county to county. To find out whether or not you might qualify for an FHA loan, speak to a loan officer or a mortgage broker.
An 80/10/10 Home Mortgage
Home buyers who do not wish to incur the expense of buying Private Mortgage Insurance have another option. They can go for an 80/10/10 home mortgage. With this option, you will use a second home mortgage to finance part of the down payment. 80/10/10 works more or less like this: your first, larger mortgage will cover 80 percent of the cost of your home. A second home mortgage will pay for a 10 percent down payment. Then you will provide the remaining 10 percent of the down payment out of pocket.