You Don’t Need a 20% Down Payment to Buy a Home

By April 10, 2017Loan Programs
Title photo, Bear thinking of how you can buy a home without 20% down payment

It’s a common perception that you need to have a 20% down payment in order to purchase a house. With the high price of rent it can be a long time before you can come up with the substantial amount it would take for you to have a 20% down payment on even just a starter home.

But in reality there are many loan programs that only require 3% down. Some programs such as USDA and VA loans require 0%!

If you don’t need a 20% Down Payment, then what’s the catch?

If you purchase a home with less than a 20% down payment then you will have to pay for Mortgage Insurance until your loan to value ratio is under 80%. Mortgage Insurance helps protect the lender in case the home buyer is unable to make their mortgage payments.

Depending on what loan program you use, the costs of Private Mortgage Insurance will vary. For example, if you get a conventional loan the PMI premium can vary based on how good your credit score is, and requires a very low or no initial payment at closing.

If you receive an FHA loan then you will have Mortgage Insurance paid to the Federal Housing Administration. There will also be a upfront cost fee that will be paid at closing and your monthly rate isn’t dependent on your credit score.

Each loan program has different requirements that could effect the cost of your Mortgage Insurance.

Some experts will advise you not to buy until you have the 20% down because they perceive Mortgage Insurance as a wasted cost. If you are renting while you save you are essentially wasting even more money. You could start to build equity in the years that it could take you to save the 20% for your down payment.

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Different Loan Programs have their own guidelines and restrictions.

Each Loan Program has requirements for qualification. These are just some of the more popular Loan Programs out there. There are also options for building a home and investment properties.

Conventional Loan – Requires a 3% down payment and a minimum 620 credit score.

FHA Loan- Requires a 3.5% down payment and credit score requirement depends on the lender.

VA Loans- Requires a 0% down payment and credit score requirement depends on the lender.

HomeReady Loans – 3% down payment and a minimum of 620 credit score.

USDA Loans- 0% down payment and a minimum of 600 credit score.

All of these loans programs have their own set of requirements. These could be based on things such as income, debt-to-income ratios, mortgage terms,and location of the home. Talk to one of our Mortgage Consultants for complete information or get a quick quote now!

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“this ad is not from HUD, VA, FHA and was not reviewed or approved by any government agencies.”