You can qualify to buy a house with as little as 3% down, or even 0% down on certain loan programs.
How Much DO You Really Need For a Down Payment?
Are you thinking of buying a home and saving for a down payment? It may not require as much as you thought. There are many mortgage loan programs that are now available that offer loans with as much as 5% down. There are even mortgage loan programs available that do not require a down payment at all. There are some advantages of putting more money down, such as potentially eliminating mortgage insurance, but do not the down payment to stand between you and your new home. You can discuss all of your options with your loan officer and see what options are available to you.
Popular Mortgage Loan Programs With Little to No Down Payment
- FHA offers loan programs with 3.5% down payment.
- Conventional Loan programs require a 5% down payment, but can be 3% for well qualified borrowers.
- FHA offers a Down Payment Assistance (DPA) product that will give you the money towards the down payment. The implementation of this program differs from lender to lender, so you should reach out to your loan officer to see if it is right for you.
- VA and USDA do not require a down payment within their own guidelines.
Aside from the down payment, you will also be required to pay closing costs associated with your loan. You can estimate between 2-5% of the sale price of the home in closing costs. It is important to note that even if you qualify for a loan program with no down payment, that you will be required to pay closing costs.
How Down Payments Work
The down payment is money that you pay upfront, when buying a home, to lower the principal that you owe on the house. The amount of the down payment depends on the price of the house and the loan program that you qualify for.
Putting more money down upfront can be advantageous. Bigger down payment results in less principal that you pay interest on. This will not only save you money in the long run, but will also lower your monthly payment.
The amount of your down payment and your loan type will also determine if the lender will require mortgage insurance on your loan. For example conventional mortgage loans do not require mortgage insurance if your Loan to Value is 80% or less. There are even lenders that will waive mortgage insurance with as little as 10% down.
You can use a mortgage calculator to play with the numbers to see the interest savings and what the monthly payment would look like.