Explore options when buying a home: A first-time buyer generally needs good credit score to start the process in earnest.

By Dee-Dee Sung / Debt-Free Diva Special to The Detroit News

Q: I've been a renter for some time and want to buy my first home. My only challenge is that I don't have enough money saved for a down payment and want to know what my options are.

A: Many first-time buyers face the same challenge of not having enough money for a down payment or to cover mortgage closing costs.

The first step you need to take is to have a lender run your credit and formally pre-approve you for a mortgage. Knowing your credit rating as well as your credit score will help determine what type of loan programs are available to you. If you don't have the down payment money from your own resources and are unable to secure a gift from a relative, here are some options to consider:

Zero-down home loans: To qualify for this type of loan, the lender will require that you have excellent credit. The reason for this is that with a zero-down loan, you have none of your own equity invested, which means that the lender is taking all the risk in this transaction.

There are two ways to structure a zero-down loan. The first is a 100 percent loan, equal to the purchase price. You will expect to pay private mortgage insurance (PMI) with this structure. The second approach is an 80/20 combination loan, which involves a first mortgage to 80 percent of the purchase price and a second mortgage (or home equity line of credit) to cover the balance of the purchase. You'll need to consult with a mortgage professional to find out the exact criteria on how to qualify for this type of loan.

Down Payment Assistance Plans: Designed for applicants who can qualify for a home loan, these plans offer all or part of the money needed for the down payment and/or closing costs. The grant is a bona fide gift that the borrower does not have to repay. The amount available to each potential homebuyer will vary according to the particular program selected. The plans are offered by a 501C-3 or nonprofit organization.

Grant money can be used for down payment, closing costs and pre-paid home-buying expenses. The only fee incurred is by the seller of the property and is paid at the time of closing. The amount of the fee will vary between the different plans, and is usually the grant amount plus a service fee.

Again, you'll want to make sure you find out and understand all the criteria involved.

As you can see, gone are the old days of having to come up with a mandatory 20 percent down payment to buy a home. What's most important is that you work with a mortgage professional who will outline the options available to you so that you can make an educated and informed decision.

Above all, you'll want to be realistic when it comes to your monthly housing payment and it's highly recommended that you have a budget in place beforehand so that you don't find yourself overextended at the end of each month.

Being a homeowner will be exciting and it could likely bring some unanticipated expenses. You'll want to make sure that you know what expenses to expect, and to establish an emergency account to make sure that you're fully prepared.