We get this question so many times that we decided to put this article together. How much are we required for a down payment to purchase a home? The minimum amount down payment required will depend on the loan type that you choose. All mortgage loan have their own specific guidelines. We will cover the different types of loans and go over each.
Down Payment Amounts per Loan Type
VA Loan
Is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). This loan requires no down payment for any mortgage up to $417,000.00. A lot of people are unaware that a VA Loan can go above the $417,000 amount. If your income will allow, you can still use a VA Loan for loans above $417,000 what will be required is a down payment of 20% of the amount over the $417,000. For example your purchase price is $517,000, then you would be required to down 20% of the $100,000 which is the amount over the maximum VA Loan amount. In this example would be $20,000 would be required.
FHA Loan
Is a mortgage loan that is insured by the Federal Housing Administration (FHA). Nowadays, FHA loans are very popular, especially with first-time home buyers because the requirements are less strict than conventional loans. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% and a credit score of 580 or higher. In the Tampa/St Petersburg area the maximum loan amount under FHA is $271,050.00. With FHA Loans there is an upfront mortgage insurance premium (MIP) — Appropriately named, this is an upfront monthly premium payment, which means borrowers will pay a premium of 1.75% of the home loan, regardless of their credit score. Example: $300,000 loan x 1.75% = $5,250. This sum can be paid upfront at closing as part of the settlement charges or can be rolled into the mortgage.
USDA (Rural Housing)
U.S. Department of Agriculture (USDA) started offering rural development loans to encourage homebuyers to live in rural and suburban areas. The USDA did this to promote growth and boost the local economies of these areas by making land and property more affordable. The loan limits vary, dependent upon income, number of members in your family. It is best to check for the specific amounts based on your personal information.
For borrowers that meet USDA loan requirements, they offer many benefits paired with relatively lenient approval requirements. Government backed and insured they offer:
- NO money down
- Low interest rates
- 30 year fixed rates
- Government guaranteed
- You have the ability to roll in your closing costs into the loan
- Flexible credit guidelines
Conventional Loan
Mortgages not guaranteed or insured by these agencies are known as conventional home loans. They include:
- Conforming loans
- Non-conforming loans
- Jumbo loans
- Portfolio loans
- Sub-prime loans
About half of all conventional loans are called “conforming” mortgages, because they conform to guidelines established by Fannie Mae and Freddie Mac. These two government-sponsored enterprises (GSEs) buy mortgages from lenders and sell them to investors. Their purpose is to make mortgages more widely available. All conforming mortgages are also conventional mortgages.
Loans that do not conform to GSE guidelines are referred to as “non-conforming” home loans. Non-conforming loans that are larger than loan limits set by the GSEs are often referred to as “jumbo” mortgages. All non-conforming mortgages are also conventional mortgages.
There are several different down payment amounts that you can choose from. Some lenders offer as little as a 3% down payment. You must understand with a conventional loan PMI will still be required unless you put down 20% or more.
Nick & Cindy Davis have relationships with several lenders that are ready to assist you with your home purchase. It is always best to talk with a lender before you start your search for your new home. This way you will know what price range you should be looking. We are here to assist you so remember you can always reach us at 813-300-7116 or simply click here and we will be in touch to start working for you!