It’s a common misconception among first-time homebuyers that one needs to save a large amount for a down payment. Though it’s usually necessary to have money aside for various fees, a down payment doesn’t have to be a 20% of the home’s contract price. Here’s how to put down less when you make an offer on your dream real estate listing.
Your Loan Options
- FHA loans are available to first-time homebuyers, which has a lower minimum down payment compared to conventional loans. When you use this type of loan, you can put a minimum of 3.5% down.
To be eligible for this rate, the home in question must be at or below the maximum loan limit for your area. You can easily find the FHA loan limit amounts through the US Department of Housing and Urban Development’s mortgage limits page. However, mortgage insurance fees apply until you pay down 20% of the original sales price.
- VA loans have helped many veterans buy homes without much money down— or nothing at all! 90% of VA loan borrowers put zero down, though they get charged with a VA funding fee of 2.5%. However, if you pay more than 5% down, this funding fee shrinks. This loan is exempt from mortgage insurance.
- USDA Loans offer no money down and 100% financing options. The catch is that you need to buy a home in a rural area and your annual income must be under $82,700 for a household of 1 to 4 and under $109,150 for households of 5+. Mortgage insurance fees also apply until you pay 20% off the sales price.
- Conventional Loans are available if you don’t qualify for any federal loans. The minimum one can put down for a conventional loan is 5%, but 20% is preferable to avoid mortgage insurance charges.
Do you need help finding the right home? Then contact an agent today at Retter & Company Sotheby’s International Realty.