How much money do you need for down payment? Well, it depends.
There are four major loan programs available (Conventional, FHA, VA & USDA). Each of these programs has a different requirement for the down payment. We will cover each of these programs so you can see the differences.
Conventional Down Payment Requirements
Conventional loan options have the most variation when it comes to down payment requirements. Depending upon how you look at it and if certain requirements are met, the down payment amounts change. So, let’s take a look at the different down payment amounts starting with the lowest available.
First Time Home Buyer
If at least one borrower qualifying for a mortgage is a first time home buyer, Fannie Mae offers a 3% down conventional loan option. What is great about this particular loan product is that there are no income limits that typically exist for these types of specialty programs. Other than the normal qualification requirements, the only restriction is that one of the borrowers is a first time home buyer…that’s it!
Fannie Mae’s HomeReady
Fannie Mae is one of the two conventional loan options available. Fannie Mae has a special program called HomeReady that allows for as little as 3% down when financing a home with a conventional mortgage. There are two main requirements to use this loan program:
- Income Limits: Up to 100% of area median income
- Homeownership Education: Education Course is required but can be done online
If you are under the income limits, complete the necessary education, and meet all of the other normal conventional qualifying requirements, then you are in luck! Not only does this program reduce the down payment to just 3% but it also reduces the cost of the mortgage insurance that is required.
Want To Avoid Mortgage Insurance?
We had a little fun in a video explaining mortgage insurance and some alternatives to paying MI.
Just click here or on the video to watch.
Freddie Mac’s Home Possible Advantage
Freddie Mac, the other conventional loan option, also has a 3% down payment option which is very similar to Fannie Mae’s HomeReady. Freddie Mac’s program is called Home Possible Advantage.
Basically, the restrictions for Home Possible Advantage are the same as HomeReady with income limits and education requirements. And it offers the same discount on the cost of mortgage insurance offered by Fannie Mae.
There are some slight variances between Fannie Mae’s HomeReady and Freddie Mac’s Home Possible Advantage, that we can assist you in navigating and selecting the right program when you are ready to buy.
The minumum down payment on a standard conventional mortgage is 5%.
There are no special requirements such as being a first time home buyer or income limits to obtain a 5% down conventional mortgage. Both Fannie Mae and Freddie Mac offer conventional mortgages with a 5% down payment.
Conventional mortgages with 20% down provide the benefit of avoiding mortgage insurance.
FHA Down Payment Requirements
Simple, right? Yes, it is really just that simple.
There are some additional benefits of putting more money down on an FHA loan. For example when you put 5% down the mortgage insurance rate drops slightly. And when you put 10% down at the time of purchase the mortgage insurance is set to be removed after 11 years of on-time payments.
VA Down Payment Requirements
I love VA home loans! They are the best loan programs out there for our veterans and active military with VA home purchase benefits.
USDA Down Payment Requirements
The United States Department of Agriculture (USDA) has a loan program called Rural Development (RD). This program is available to those purchasing in the eligible areas set by USDA.
The benefit of the USDA mortgage loan is a 0% down payment.
You’ve discovered that there are a variety of loan programs, each with different down payment requirements. But you’ve also found that if you meet certain requirements, that down payment amount may be reduced. In addition, putting a bit more money down can save you money through reduced or eliminated mortgage insurance.
When are you aready to get started we can help you to identify the best option for you!
Not quite ready?
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