Myth 5/7: A buyer must put down 20 percent to get a loan

Traditionally, a buyer got a 30-year-fixed loan and put 20 percent down. But times have changed.

With higher home values have come creative loan products. These aren’t necessarily the types of loan products that got people into trouble 10 years ago, however. Today, there are government-backed loans such as those from the Federal Housing Administration (FHA) that allow for as little as 3 percent down. These loans are a little more difficult to obtain and require a few extra layers of approval. But they’re available to borrowers with strong credit and income. With interest rates still at 20-year-lows, a smart buyer today will leverage the bank’s money to work for them.

Of course, buyers should never sign up for a loan they can’t afford. And they should always double- and triple-check their rate and payment schedule. It’s important not to get caught up in a small down payment scenario where the interest payment is low at first but then increases, unless the buyer can plan for it. If a buyer is serious about living in a location for at least seven years and wants to put down roots, then explore the available loan options. A five-minute call with a mortgage broker or banker can be quite revealing.

Excerpt from Zillow Article