Down payments can often be the biggest obstacle for home buyers. Luckily, there are several options available. By working with a knowledgeable loan officer, you can find a loan product and down payment option that will work best for your situation. The amount of the down payment is the primary determining factor for your available loan options.
Conventional mortgages have multiple down payment options. Those who haven’t purchased a home in the last three years are considered first-time homebuyers and qualify for a 3 percent down payment. Other buyers have multiple down payment options available, but do require a minimum of 5 percent down. This loan type will require mortgage insurance until you reach 80 percent loan to value. After that point, you can request to have the mortgage insurance removed.
FHA Loans require mortgage insurance for the life of the loan, but have the benefit of only requiring a minimum 3.5 percent down payment. This loan type is one of the easiest to qualify for as long as the house meets the requirements for an FHA loan and is appraised by an FHA-approved appraiser.
USDA / RD Loans
USDA / RD Loans require no down payment which means a homebuyer can finance a home for 100 percent of its purchase price. In order to qualify for this loan type, the home must fall within a designated rural area. Another qualification is that the household income cannot exceed 115 percent of the area’s median income. USDA / RD loans also come with mortgage insurance, but the percentage is less than the rate that comes with an FHA loan.
VA Loans are only available for veterans and require proof of eligibility. This loan type requires no down payment and no monthly mortgage insurance. There is an upfront funding fee for this loan type, but that fee can be rolled into the loan at closing, saving your cash required to close.
While down payments may seem daunting, a loan officer can help you find a loan and down payment that works for you. At Simply Home Lending, we realize that each situation is different and we will work with you to find the right option.