Deciding on how much money to use as a down payment can be confusing. True Financial is here to help. The route for each buyer or investor depends on their situation and personal preferences.
Eligible borrowers may purchase a qualifying home with an FHA loan and a down payment as low as 3.5%. FHA loans generally require an upfront mortgage insurance premium and an annual mortgage insurance premium (MIP), paid in monthly installments. FHA mortgage insurance is different from conventional private mortgage insurance (PMI).
Conventional loans generally require PMI when the down payment is less than 20%. Costs and cancellation rules depend on the loan program and applicable requirements.
Is your dream home surrounded by pasture and farmland? Buyers in rural and suburban markets may be able to use a USDA loan, which requires no money down.
Household income and property eligibility requirements apply. USDA guaranteed loans generally carry an upfront guarantee fee and an annual fee, rather than conventional PMI.
Military veterans who qualify for a VA loan can purchase a home with no money down. VA loans can provide up to 100% financing for qualified military personnel and veterans.
There are also non-conforming mortgage loan programs available that allow for 80/20 set-ups, which allow borrowers to obtain a second mortgage to cover the 20% down payment.
Have less than perfect income and credit? We may have a program that fits your needs!
There are costs and benefits to any option, including those with low down payments. You should carefully consider your options and discuss your plan with a professional.
Talk to one of our loan specialists today to come up with a customized solution that best fits your needs and budget.
Low or no down payment programs have two primary costs that result in a higher monthly payment:
Mortgage insurance does not automatically end when every borrower reaches 20% equity. Conventional PMI may be canceled or terminated when applicable requirements are met. FHA MIP follows its own duration rules, and USDA annual fees are different from PMI. Refinancing into a different loan may change these costs, but requires qualification and may involve closing costs.
Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.
The chief benefits of lower down payment include the following:
During the first few years of the mortgage loan, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.
Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.
Talk to your loan officer at True Financial about the best situation for you.
