Secure a Mortgage Without a Big Down Payment

In the early part of the 20th century, mortgages were difficult to get, and had to be renewed annually. If you fell on hard times, you lost your home. Depression-era government programs such as the FHA, which still serve homeowners to this day, changed the whole picture, and today achieving that American Dream has become a lot easier. But still, for some of us, it needs to be easier still.

The biggest obstacle for most potential homebuyers is the down payment. A standard bank mortgage will require a 20 percent down payment - unfortunately, more savings than most Americans have. The good news is, that big down payment isn't always necessary, and in some cases, you can get a home for very little, or even nothing down. Here are a few tips on how to reduce the initial outlay.

The first and most obvious way to avoid a big down payment is to have spotless credit, a reasonable debt level and a solid job you have been at for more than a year. Bankers will love you, and will be more willing to write you a mortgage with 10 percent, or perhaps even five percent down. But, not everyone falls into this banker's "sweet spot," and in fact, more people are falling out of it than ever before. If you're not in this category, don't despair. There are still other options.

In some, but not all cases, you may use a gift or a loan from a third party to make up your down payment. FHA loans allow for 100 percent of your down payment to come from a gift, so if you are fortunate enough to have someone who wants to give that to you (think wedding present), you may be able to get the mortgage you want. Similarly, if you have a 401(k) program with your employer, you may well have enough funds in there to finance your down payment, and many loan programs allow you to use borrowed 401(k) proceeds for a down payment.

In almost every case, however, if you down payment does not meet the 20 percent threshold, you will be required to purchase mortgage insurance, which will add significantly to your monthly payment. This type of insurance protects the borrower in case you default.