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Susan Funk, Broker RSVP Real Estate



Do I Need 20% Down to Buy a House?

Posted by Susan Funk

It seems to be the common perception that if you want to buy a home in today’s market, you need to put at least 20% down.


Fortunately, for many home buyers, there are many exceptions to this rule. Lending Tree recently released a study claiming that the average U.S. mortgage down payment is about 12.25%.


The following scenarios may allow you to purchase a home for less than 20% down.


FHA Loans


FHA loans are the most popular low-down-payment mortgage loans. FHA loans allow down payments of as little as 3.5%. FHA mortgages traditionally have a clientele of mostly lower-income homebuyers and first-time homebuyers. However, they have become extremely popular since the subprime mortgage crisis as an option for a low-down payment home loan.


VA mortgages


The primary remaining source of no-money-down mortgages is the Veterans Administration through a VA home loan. To qualify, you typically have to have either served or be currently serving in the military.


Certain nonmilitary persons can qualify for VA mortgages also, including certain surviving spouses of veterans, officers of the Public Health Service or National Oceanic and Atmospheric Administration.


Conventional mortgages


With as little as 5% to 10% down, you may still be able to get a conventional or standard mortgage. Fannie Mae or Freddie Mac backs these loans, and they generally require better credit than the programs mentioned above.


A lender will be more likely to approve you for a mortgage with only 5% down if you’re buying a home in a local market where real estate values have been relatively stable.


Fannie Mae’s Homepath


Fannie Mae’s Homepath program is a low-down payment program that doesn’t required mortgage insurance. Homepath is Fannie Mae’s program for selling foreclosed properties that have come into its inventory. Homepath mortgages require only 3% down, there’s no requirement for mortgage insurance, and you can borrow up to an additional $35,000 for necessary renovations and repairs.


Credit standards remain high for Homepath mortgage loans.


Keep in mind that if you choose a low-down payment program and put down less than 20% down, your interest rate may be higher and in many cases, you’ll have to pay some sort of mortgage insurance.


To discuss mortgage loans options and whether a low-down-payment loan is right for you, contact us today.

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