You Don't Need 20% Down To Buy A Home

Dated: December 24 2020

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Down payment

You Don't Need 20% Down To Buy A Home

A down payment on a house is a key first step in buying and owning your own home. If you're new to the housing market, you might be completely lost and not know where to start. 

Buying a house doesn't have to be scary. As long as you come in knowing the basics, like how much payment is expected upfront, how it will have an impact on your credit, and more, you'll be ahead of the crowd. 

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What is a Down Payment?

By definition, a down payment on a house is the money a home buyer gives to a home seller to lock in the home purchase deal.

In most cases, the remaining cash owed on a home purchase is paid via a mortgage loan obtained by the buyer. In that regard, the lender views a down payment as proof you're invested in the home purchase, and that you're committed to buying the home and making all your mortgage payments.

In financial terms, a home down payment is calculated as a percentage of the total home purchase. For example, if you're buying a home for $200,000 and you pay $20,000 as a down payment, your down payment is 10% of the entire home purchase.

Types of mortgages 

To best gauge the amount of money you'll want to make in a home down payment, it's helpful to know what to expect from various mortgage lenders.

Fixed Rates are Very Low!

If you plan to stay in your home for the long term, sleep tight knowing you will have the stability of a consistent payment that never changes. Plan your budget with a consistent mortgage payment at a low rate that will stay the same throughout the life of your loan.

How it Works

  • Monthly payments based on the interest rate, principal loan amount, and amortized interest over 30 years
  • Your payment will not change throughout the life of the loan
  • Your actual payment will vary based on your situation and the current interest rates when you apply
  • Pay your mortgage off at any time without pre-payment penalties

Qualification Requirements

  • Refinance up to 95% of your primary home’s value
  • Buy a home with as little as 5% down (primary home)
  • Loan amounts from $25,000 to $2,000,000

Conventional Mortgage

It’s possible for first-time homebuyers to get a conventional mortgage with a down payment as low as 3%; however, the down payment requirement can vary based on your personal situation and the type of loan or property you’re getting:

  • If you’re not a first-time home buyer, the down payment requirement is 5%.
  • If the home you’re buying is not a single-family home (i.e., it has more than one unit), you may need to put down 15%.
  • If you’re buying a second home, you’ll need to put at least 10% down.
  • If you’re getting an adjustable-rate mortgage, the down payment requirement is 5%.
  • If you’re getting a jumbo loan, the down payment requirement ranges from 20% to 40%.

If you’re refinancing, you’ll need more than 3% equity to refinance. In all cases, you’ll need at least 5% equity. If you’re doing a cash-out refinance, you’ll need to leave at least 20% equity in the home.

FHA Home Loan

An FHA loan provides a government-insured loan with flexible loan options. Less strict credit requirements and qualifications make this loan the easiest loan for buying a home or refinancing. Save money with an easy and fast FHA loan, qualifying is simple!

How it Works/Payments

  • Pay your mortgage at any time without pre-payment penalties
  • 30-, 25-, 20- and 15-year terms are all available with fixed rates
  • 5-year adjustable-rate mortgage available

Qualification Requirements

  • Credit scores as low as 580 may qualify
  • Refinance up to 97.75% of your primary home’s value
  • Buy a home with as little as 3.5% down (primary home)

Got questions?  Give us a call!  One of our mortgage specialists would be happy to answer all of your questions and get you started with a great low rate today!

VA Home Loan

Are you are a veteran, member of the military, or military spouse? You may qualify for a VA loan.  VA Loans offer flexible options as either fixed-rate or ARM mortgages.  You may qualify for fast approval and a hassle-free loan even with less than perfect credit.  Refinance up to 100% of your home or buy a new home with no down payment and never pay monthly insurance (PMI)!

VA Loan Highlights

  • 30-, 20- & 15-year fixed-rate and 5-year ARM loans available
  • Jumbo VA loans available
  • Refinance up to 100% of your primary home’s value
  • VA Streamline Refinance with a reduced funding fee and flexible documentation requirements – available for veterans currently in VA loans
  • Buy a home with no money down (primary home)
  • No monthly PMI (Private Mortgage Insurance)
  • VA loans are governed by the U.S. Department of Veterans Affairs

How VA Home Loans Work

  • Fixed-rate monthly payments are based on the interest rate, principal loan amount, and amortized interest over 15, 20, or 30 years. Your payment will not change throughout the life of the loan
  • ARM interest rates are fixed for a period of 5 years. After the fixed-rate period, your interest rate can adjust up or down depending on the market
  • Pay your mortgage at any time without pre-payment penalties

USDA (Rural Development) Loans Overview

A USDA loan is a home loan insured by the United States Department of Agriculture. USDA Loans offer affordable 30-year terms with 100% financing. That means no money down!

This site is used to inform, determine eligibility, and to apply for the USDA home loan programs. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by the USDA. You can research all this information from this site along with links to the USDA homepage to check qualifying household income and property eligibility tester.

Applying for a USDA home loan is easy and secure you can fill out a quick online application or call to speak to a USDA loan specialist to see if you qualify for the program. USDA Loans .Net  has all the information you need to know. Contact a USDA Loans specialist and apply for a USDA loan today.

Do you qualify?

USDA Loan Qualifications

To be eligible for a USDA Loan the home being purchased has to be located in an area deemed eligible by the USDA’s Rural Development department. Here is the link to the USDA Rural Development location eligibility checker page USDA Map

Per USDA’s Rural Development guidelines there are household income caps for the program. RD has segregated these restrictions per county. The income caps include total household income. Not just the persons on the loan but any person that will be residing in the residence. The average income cap for total household income is about 78,200 a year for a one to four-person household.

Once you have more than 5 persons in the household the income limit goes up dramatically. Areas with higher median area income will have higher limits. Be sure to call us to verify if your income meets the guidelines for the USDA loans program in your area.

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Ted Daigle

About Ted Daigle – Realtor Growing up in Church Point, LA instilled values of hard work and dedication, which has carried over into every aspect of his life, including real estate. This Lafayette r....

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