You might not have enough cash for a 20% down payment on a home loan. Or, you might not want to liquidate your assets, or use all your cash, for a down payment.
If you qualify for a home mortgage, you don’t necessarily have to put 20% down.
Private Mortgage Insurance (PMI)
If you don’t put 20% on a home loan, count on purchasing private mortgage insurance (PMI).
The insurance premium can be paid monthly with your mortgage, as a lump-sum at the time of closing, or built into your mortgage rate (LPMI). The insurance doesn’t have to be paid for the term of the loan, just till your loan-to-value (LTV) ratio reaches around 78-80%, depending on your lender.
5% Down Payment for Conventional Loans
Conventional home loans require a 5% down payment. As mentioned above, the lender will require PMI for loans with less than 20% down, which might be a perfect alternative to using your cash for a down payment.
3.5% Down Payment for FHA Loans
FHA (Federal Housing Administration) home loans require a 3.5% down payment, and are commonly easier to qualify for, especially for first-time home buyers.
$100 Down Payment for FHA Loans
Home buyers purchasing a HUD-owned home that’s in foreclosure, and was previously financed using the FHA, may qualify for the FHA $100 down payment program.
Search the HUD Store to browse available inventory.
Zero Down Payment for VA Loans
VA loans offer competitive rates with low or no down payments, and don’t require mortgage insurance.
A VA home loan is a mortgage loan that’s guaranteed by the U.S. Department of Veterans Affairs, and is issued by qualified lenders to eligible American veterans or their eligible surviving spouses.
Zero Down Payment for USDA Loans
The USDA Rural Development Guaranteed Housing Loan Program offers mortgages with no down payment, and allows you to finance 100% of the property value.
The loans have maximum household income limits that vary by County, and income limits that change annually.
Which Down Payment Option is Best for You?
There are a lot of loan options with different down payment options.
Once we pre-qualify our clients, we help them weigh the pros and cons of each loan to determine which best suits their needs.
We would like to help you the next time you begin the process of purchasing a new home or refinancing. Please contact us, and let us help you weigh out your options, and determine which loan and down payment is best for you.