When we talk with our clients, one of the biggest topics that people ask about is down payments. Many borrowers are uncertain about how much they need, whether they should put down more than the minimum, or whether they can buy a home without the traditional 20% down payment. Fortunately, the mortgage experts at Crystal Clear Mortgage know all about your options and are happy to go over your unique circumstances with you to match you to the right loan – and down payment – for you. But if you’re looking for the low-down on down payments, we’ve gathered up what you need to know.
What is a down payment?
A down payment is simply the money you’ll pay up front at the mortgage closing. It’s often discussed as a percentage. For those who want to make a 20% down payment on a $200,000 home, the down payment will be $40,000.
How much do I need for a down payment?
Here’s where the answer gets tricky. With a conventional home loan, we typically think about a 20% down payment. But it’s a mistake to think that all borrowers must pay 20% down – or even that you must pay 20% down to get a conventional mortgage. Homebuyers can even get a conventional mortgage with as little as 3% down – with the right experts by their sides
Your Crystal Clear Mortgage loan officer can walk you through all of the considerations and help you reach a decision that’s right for you.
What kinds of down payments are required for a conventional loan?
How much of a down payment is required depends on the purpose of your property purchase. With a conventional loan, you can pay as little as 3% to 5% down for a primary residence depending on your credit score. For a secondary residence, you’ll need to put down 10% or more, and for an investment property, which has stricter lending requirements, you’ll make a down payment of 15%-25%.
What about an FHA loan?
With an FHA loan, you can make a down payment of just 3.5% with a credit score of 580 or more. You can’t buy a secondary residence or investment property with an FHA loan.
How much is required for a VA loan?
Actually, a VA loan has no minimum required down payment – but there are specific qualifications you have to meet. Call our experts today to learn more about VA home loan benefits. While you can use a VA loan to purchase a primary residence, you can’t use a VA loan to purchase a secondary residence or investment property.
How much do I pay down with a USDA loan?
Again, no down payment! However, you’ll need to meet certain income requirements and the home you’re buying will need to meet USDA loan qualifications – such as being in an approved rural or suburban area.
What should I consider when deciding how much of a down payment to make?
Generally speaking, you’ll need to think about things like how your down payment will affect your monthly payment and whether you want to avoid paying private mortgage insurance – which is paid on loans with less than 20% down. Your Crystal Clear Mortgage loan officer can walk you through all of the considerations and help you reach a decision that’s right for you.