LOW DOWN PAYMENT MORTGAGE OPTIONS WITH LESS THAN 20% DOWN
DOWN PAYMENT FOR FHA $100 DOWN PROGRAMS: $100
Available to most U.S. buyers, the FHA features a special “$100 down” loan with accompanying low mortgage rates.
Via the program, buyers can grab HUD-owned homes at steep discounts. In order to use the $100 down program, buyers must purchase a HUD home which was previously financed via the FHA and which has since moved into foreclosure and did not sell at the court house steps.
Your real estate agent or lender can help you to identify eligible U.S. homes.
DOWN PAYMENT FOR CONVENTIONAL LOANS: 3%
Conventional loans require the buyers to make a minimum 3 percent down payment on a home. In general, if you have less than 20% down payment you are required to pay private mortgage insurance (PMI) will be required.
PMI can be paid monthly with the mortgage; in one lump-sum at the time of closing; or “built-in” to your mortgage rate (LPMI) Lender Paid Mortgage Insurance.
In general, the smaller your down payment and lower your credit score, the higher your (PMI) rate will be.
DOWN PAYMENT FOR FHA MORTGAGE LOANS: 3.5%
Backed by the government, FHA loans have been popular with U.S. buyers since their launch in 1934.
FHA loans require just a 3.5 percent down payment and are often more appealing than comparable conventional loans because of their less stringent route through underwriting. FHA loans are incredibly forgiving with respect to credit scores, income and assets.
The FHA loan’s flexible underwriting standards make it an appealing financing option — especially for first time homebuyers.
DOWN PAYMENT FOR VA MORTGAGE LOANS: NO DOWN PAYMENT =100% FINANCING
The VA loan is another government-backed loan. Guaranteed by the Department of Veterans Affairs, it’s a program allowing for no down payment whatsoever.
To be eligible for a VA loan, you must have served in the U.S. Armed Forces, or have been a member of the National Guard or Reserves. In some cases, spouses of deceased veterans are eligible as well. VA underwriting is very similar to FHA underwriting in terms of leniency.
However, VA loans stand apart because they require zero down payment and no mortgage insurance whatsoever.
DOWN PAYMENT FOR USDA LOANS: NO DOWN PAYMENT
The U.S. Department of Agriculture (USDA) also offers a zero-down payment mortgage.
The USDA’s Rural Housing loan is meant to help people buy property into non-urban areas nationwide. Most “modest homes” are eligible and homeowners are generally restricted to a “modest income”. USDA loans are available in all 50 states and underwriting guidelines are similar those with the FHA and VA.
There is a small mortgage insurance premium associated with USDA loans which less than with a comparable FHA loan and higher than a comparable VA loan.
HOW MUCH DOWN PAYMENT SHOULD I MAKE?
When trying to determine how much to put down on a home, in addition to the minimum down payment requirements, it’s important to understand how your down payment will affect your monthly mortgage payment and obligation.
Conventional wisdom says that the bigger down payment you can make, the better. This results in a smaller monthly payment and less money owned. However, wiping out your savings or retirement account to make a big down payment is rarely a wise choice.
Do your homework on down payment options. Compare today’s mortgage rates and mortgage programs and see for what program’s you’re eligible. At today’s low rates, there are a lot of terrific choices.
Contact one of our USML loan officers today and put our experience to work for you.