How Much Do I Need to Put Down on a House
September 20, 2021
Minimum Down Payment Requirements
Different lenders have different requirements when it comes to the down payment on a home loan.
- FHA loans, backed by the Federal Housing Administration, require only 3.5% down with a 580 credit score.
- VA loans, insured by the U.S. Department of Veterans Affairs, for current and veteran military service members and eligible surviving spouses, have no down payment requirement.
- USDA loans, guaranteed by the U.S. Department of Agriculture's Rural Development Program, do not require a down payment.
- Most conventional loans (those not insured by the government), require a minimum down payment of 20%.
Lenders look favorably on borrowers who are able to make a sizeable down payment, as it gives them peace of mind. FHA-approved lenders feel more secure accepting a smaller down payment since they are insured by the government agency, and the lenders are protected in the case borrowers are unable to pay back the mortgage amount.
Mortgage Insurance
Applying for a conventional mortgage may mean paying for Private Mortgage Insurance (PMI). This is charged to borrowers when they are unable to make the minimum down payment (usually 20%) but still want to apply for it. While this option helps qualify for the loan, it also increases the cost of the loan itself. Borrowers can make a lower down payment upfront, but the monthly PMI premium is added to the mortgage payments. It is also important to remember that PMI does not protect the borrower. Instead, it protects the lender from losses if the borrower defaults on the loan. In most cases, borrowers will only have to pay for PMI until they have amassed enough equity in the home (usually up to the 20% requirement), and can have the premium dropped at that point. Talk to your loan officer to make sure this is an option.
How Down Payments Can Affect Your Interest
The amount of money directly impacts the amount of interest you pay over the life of the loan. Making a larger down payment means paying less in interest, since you are borrowing less money. Imagine that you are buying a $200,000-home with a down payment of $20,000. You will be paying interest on a $180,000 loan. (200,000 – 20,000). However, if you pay only $10,000 upfront, you will be paying interest on a $190,000-loan instead.
Trying to calculate how much money to put down on your home can be daunting, but having the information you need makes the decision easier. It is important that as a potential homebuyer that you do your research and learn about your options, including Down Payment Assistance Programs. Head to www.fha.com to for a comprehensive list of programs for each state.
------------------------------
RELATED VIDEOS:
Do What You Can to Avoid Foreclosure
Homes Financed With FHA Loans Must Be Owner Occupied
FHA Programs for First-Time Homebuyers
FHA Loan Articles
October 31, 2024When buying a home for the first time, it helps to know how long the process can take. How do you know if your appraisal report is delayed if you don’t know how long the FHA allows for the process to be completed? How long does it take to get from the final offer to closing day? A “typical” FHA loan process may take up to 45 days from start to finish. Several factors can influence this timeline.
October 30, 2024Just because an FHA loan is designed to be more lenient with FICO scores and require a lower down payment doesn’t mean the house you buy with that loan is less than ideal. Did you know that FHA loans have minimum property standards to ensure the home is safe and livable? Those standards require the home to have an “economic life” for the entire term of the loan so you can freely sell the property later on if you choose to do so.
October 29, 2024Buying a home with an FHA mortgage is a major life decision, and preparation is essential before you start house hunting or consider making an offer on a property.
How to get started? In the early stages, establishing your budget and how much work you need to do on your credit is key. But once you have gotten past the initial phase of that planning you’ll want to consider the house itself and what you want from it.
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
October 24, 2024Buying your first home is a major milestone. If you use an FHA mortgage to buy your home, you’ll have two types of insurance to consider. One type is the FHA-required mortgage insurance premium, which is paid for 11 years or the loan's lifetime, depending on your down payment, loan term, and other variables.
