A big part of buying a home is coming up with a down payment, but oftentimes there are many misconceptions surrounding down payment requirements. If you are a first-time homebuyer, there are many options for the details of your mortgage loan and down payment. Here are five things all first-time homebuyers should know about down payments.
There is no 20% down payment requirement.
A widespread misconception is that first-time homebuyers need a minimum of 20% down to purchase a home. While there are benefits to putting down 20%, it is not a rule.
Several mortgage loan choices require down payments as low as 3% or even 0% if you’re in the military. Plus the money doesn’t necessarily have to come out of your pocket.
First-Time Homebuyers Can Put Down 3% for a Conventional Loan.
Did you know it’s possible to get a conventional home loan with a 3% down payment? Fannie Mae and Freddie Mac (the two government-sponsored enterprises that buy and sell mortgages) have programs that uphold these low down payments. That said, your financial situation will determine your down payment requirement and the type of mortgage you are getting. Those who are not first-time buyers may have to put down more, depending on the loan product.
The Down Payment Requirement for FHA Loans is 3.5%.
Another option for first-time homebuyers is an FHA loan. With this mortgage insured by the Federal Housing Administration, you can make a down payment of 3.5% of the appraised value or purchase price, whichever is less. This program is helpful for first-time homebuyers who have limited savings.
A 0% Down Payment is Possible if You’re In The Military.
If you are a first-time homebuyer and in the military, you could be eligible for a U.S Department of Veterans Affairs (VA) loan. This program gives back to those who have courageously served our country. It allows a 0% down payment for eligible borrowers.
The Down Payment Can Be a Gift to First-Time Homebuyers.
Down payment funds can be given to first-time homebuyers from a third party, known as gift funds. The money can be from a relative, friend, employer, or another approved donor. Whoever it is, they will need to write a letter stating that the money is a gift, and they do not expect reimbursement. These requirements can vary depending on the loan type, so be sure to review the guidelines with your real estate agent or a JVM Mortgage Analyst.
You have many things to consider when purchasing a home. Discussing your options and qualification with one of JVM’s Mortgage Analysts can help you find the right mortgage loan type for your financial situation. Whichever home you choose, our team is available 7 days a week by email at [email protected] or by phone at (855) 855-4491 to help.