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How Much Down Payment do I need to buy a Home?

Posted: March 12, 2018 at 12:00 AM by Alan Tucker

Are you a renter tired of paying another person’s mortgage?  This may be the best time to get your foot in the door of your own new home.  You may be thinking I don’t have the money for a down payment on a home.  The days of having 20% for a down payment are long gone.  There are many alternatives available.  Here’s what you need to know if buying a house is in your future.

Down Payment Options

You might not have 20% down payment for a home.  While there are benefits to having equity in the home you’re buying, that doesn’t mean you are out of the running to becoming a homeowner.  There are other options for down payments. 

3.5% Down

For an FHA loan, the minimum down payment is 3.5%.  Most FHA lenders can lend up to $417,000.  It comes with a monthly mortgage insurance payment which can make it more expensive than a conventional loan.  In some markets, the higher loan amounts allow someone with strong income and less cash to still purchase. 

5% Down

Another popular option is to use a conventional loan and put 5% down.  As an alternative to the higher priced FHA loan, the conventional loan allows for getting rid of the PMI after accumulating the 20% equity after a minimum of 24 months.

0% Down

Two options are available for 0% down loans: one through the U.S Department of Veteran’s Affairs that allows veterans to purchase a home for literally no money down.  Of course, you need to be a military veteran to qualify for this type of loan.  An alternative to this program is a loan guaranteed by the U.S Department of Agriculture.  You do not need to be a veteran for this program but you may not be eligible due to tighter qualifying income-to-payment ratios and location.  This program is for homes that are designated rural. 

It’s important to remember that if you are putting less than 20% down on a home, your monthly property taxes and fire insurance terms are required to be built into the monthly mortgage payment and that will make it higher. 

When preparing to look for a loan you want to have your credit in great shape.  That is your strongest ally in obtaining a home loan. 


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