How to purchase a house with a partial down payment

How do you buy a house with not quite enough money? Contrary to popular belief you can buy a house even if you don’t have enough money to do it. It’s a little technical but it’s going to require you, your realtor, and your lender to put your heads together. Here’s how it can be done.

Let’s say you have a good credit score; you have a good income, and you have manageable expenses for a proposed house payment. Let’s say you’re trying to purchase a house for $500,000. Say the total amount of money that you have is $15,000. Well, when you purchase a house, you must have a down payment plus closing costs.  What if your income is otherwise very strong about the proposed house payment with other monthly expenses you have in your life? Well, if you’re down payment that you have as $15,000 and you’re buying a $500,000 house you’re probably going to need at least $27,000. You need 3.5% down on $500,000 which is $17,500.

So, the good news is you have the down payment you can ask for, a seller’s credit for the difference of $10,000 which could make your purchase negotiation more difficult especially if other offers are looking at the same house. Or you can split the credit that you’ll need and get a silver credit for a safe $5,000 and a lender credit for another $5,000 then you’re only bringing in your $17,500. Another alternative would be to take a much higher interest rate. For example, say that the interest rate you’re getting is 2.875% on an FHA 30-year fixed and you had the income to support it. You could effectively consider taking a rate 1% higher than the market saves 3.875% in this illustration and get the $10,000 credit from the bank instead of paying for it. This gives you a better negotiating position for you and your real estate agent, and it gets you into the house with the cash that you have while putting you on a payment that you can afford. This is a solution to get you into the home with the cash that you have. Remember you can always refinance the house later down the line. VA and FHA streamline refinance or going to a conventional loan altogether and drop the private monthly mortgage insurance. A good creative lender that understands mortgages and that has specific experience in dealing with situation-specific borrowers like this is a great place to start.

 

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RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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