Down Payment Options How Much is Enough?

Thinking about buying your first home? Coming up with enough money for a traditional 20% down payment for a home loan is often the biggest hurdle that prospective homeowners face.
 
Luckily, there are many mortgage options out there that do not require 20% down. A VA loan, for example, doesn’t require a down payment at all. Your dedicated Loan Officer at Certainty Home Loans can help you find the right financing option for your specific needs.
 

What is the Minimum Down Payment?

Depending on what loan program you choose the amount you would be required to put down will be based on income, eligibility, and your personal goals. According to the 2019 National Association of Realtors 2019 Buyer and Seller Survey, the median down payment for buyers was 12%. However, it was just 6% for first-time homebuyers, and 16% for repeat buyers. As you can see, all of these statistics are under the 20% mark that is often cited for buying a home.
 
There are many loan programs that were created to make homeownership more attainable by offering low or no down payment options with flexible qualifying criteria. Some of these include:

• FHA loans (as low as 3.5% down)
• VA loans (as low as 0% down)
• USDA loans (as low as 0% down)

FHA Mortgages

An FHA home loan is insured by the Federal Housing Administration (FHA) and is a popular option with first-time homebuyers because the down payment can be as low as 3.5%. In fact, 25% of first-time homebuyers used an FHA loan to purchase their home in 2019. It was created to help potential homebuyers by providing lower down payment options and flexible underwriting guidelines. FHA-approved lenders are able to offer these benefits because borrowers with an FHA loan pay mortgage insurance, which protects the lender if the borrower were to default.
 

VA Mortgages

A VA home loan is one of the most attractive and flexible mortgages available out there, offering a 0% down payment. VA mortgages are available exclusively to qualifying active-duty service members, veterans, reserve members, National Guard members, and eligible surviving spouses. To qualify for a VA loan, you must have sufficient credit and income and a valid Certificate of Eligibility (COE).
 

USDA Mortgages

The USDA home loan offers qualifying borrowers the option of no down payment when they purchase a home in a designated area. The USDA mortgage has less stringent qualifications and credit requirements compared to many other mortgage options. Income limits vary by location and depend on the size of your household.
 

Down Payment Assistance Programs

Another option for hopeful homebuyers may be Down Payment Assistance programs. These are often offered by the state or county that you live in. Make sure to check with your Loan Officer to see if there are any that you may qualify for, including grants for first-time homebuyers.
 

The Full Picture of Down Payments

It is important to consider the entire picture when looking at your financing options with your Loan Officer. For example, if you put less money down on a home your interest may be higher and your monthly payment will be higher. Depending on what you qualify for, you might also have to pay private mortgage insurance (PMI). PMI protects the lender in case you default on the loan and is calculated as a percentage of the loan amount and added to your monthly mortgage payment.
 
At Certainty Home Loans, we offer a wide array of mortgages and will help guide you through choosing the right one. Find a local Loan Officer near you to get the conversation started.