You Don't Need 20% Down to Finance a Home!
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Let's chat about down payment requirements. I spend quite a bit of time educating the public about various mortgage topics, and the down payment myth is the probably one of the most common topics I deal with. Often times, people tell me upfront that they don't have 20% to put down on the home, to which I respond by letting them know they don't need that much!
So, what do you need, and why do people still think you need 20%?
Here's the deal.....if you go down to your local bank, say your grandma's bank, they may tell you that need 10-20% down. Why is that? It's because they probably do not deal in secondary market- they keep the loans they close in their own portfolio. That means they won't be using FHA, USDA, VA or even Freddie Mac or Fannie Mae as their partner. Because of that, the loan is riskier for them, and they need to compensate that risk by requiring a larger down payment. If they used the government backed lending institutions (FHA, USDA, VA) it minimizes their risk because these programs offset the low down payment by using MIP (Mortgage Insurance Premium) or other fees that are typically paid upfront by the borrower in case they default on the loan. When people default, the lender is able to get paid by these funds that were paid at closing. Hopefully, that makes sense.
Now let's discuss what you need for a down payment if you are using a mortgage lender that works in the secondary market (that's what I do, BTW). We utilize these government programs that allow for low down payment options, like 3-3.5%. Freddie Mac and Fannie Mae will allow as low as 3% down, while FHA is 3.5%. USDA and VA offer 100% financing- NO DOWN PAYMENT! That's incredible!
There are also specialty products out there that will allow for 1% down (ask me about this one, it's amazing) or they may give a specified amount towards the closing costs. There are also down payment assistance programs that you can pair with either conventional or government products that can give you up to 5% in assistance- this can give you the down payment you need as well as cover some of the closing costs. These down payment assistance programs can be forgivable or unforgiveable grants or 2nd liens- so make sure you know exactly what you are getting! Work with a lender that can help you identify which one is best for you.
If you want to see if you qualify for a loan such as FHA, VA, USDA or conventional, click here to set up a call with me:
If you want more information about down payment assistance programs, click here to schedule a call:
If you are an agent and want more information on down payment assistance or any product listed above, click here to set up a call:
See more about me and what I can do for you at Apexmtg.net/swilliams
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