52% of Homebuyers In California & Nationwide Have Down Payments Less Than 20%

    Zillow recently published their Consumer Housing Trends Report 2018, which included in-depth reporting surveys on 20% down payments in California and across the nation.

    The comprehensive report found that nearly 52% of homebuyers across the nation are making down payments on home purchases with less than 20% down. This should come as a welcome surprise for California homebuyers who have been concerned that they lacked the funds necessary put 20% down on a home purchase.

    It is a common misconception among California homebuyers that they must put 20% down in order to qualify for a mortgage loan. However, there are a few different loan programs that have more flexibility in their underwriting and down payment guidelines for homebuyers.

    FHA Loan – Less Than 20% Down in California

    FHA loans are an excellent option for California homebuyers who are in the market to purchase a property but are lacking the funds for a 20% down payment. FHA loans require homebuyers to put less money down in comparison to other conventional loans. FHA only requires a 3.5% down payment from borrowers.

    FHA loans are also more flexible with their credit requirements for homebuyers. Homebuyers can have credit scores as low as 580 when using an FHA loan.

    Mortgage Insurance

    California homebuyers who use FHA loans, or who put less than 20% down with a conventional loan, will have to pay some sort of mortgage insurance. In 2018, FHA homebuyers will have to pay a 0.85% mortgage insurance, divided by 12 months and spread out over the course of their loan.

    Mortgage insurance is an exceptionally good deal for homebuyers who cannot afford to have a 20% down payment or who have lower credit scores because it gives them the opportunity to own sooner. In today’s current and hot market, the chance to begin building equity will far outweigh the cost of mortgage insurance.

    This blog covers the very basics of FHA loans and mortgage insurance. If you are thinking of buying, contact us to talk through your options. You can reach us at (925) 855-4491 or [email protected], or by going here.

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