by Michael L. Baker, Sr. Loan Officer at Fountain Mortgage.
I am not sure where it has gotten out that you HAVE to have 20% down payment to buy a house today, but I am going to make it my single mission in life to correct the misinformation that is floating out there around down payments.
We have down payments that start at 0%, 1.5%, 3%, 3.5%, 5% and on up from there. Let’s discuss where and when you might use or be eligible for these various down payments.
0% Down Payment
Currently there are two 0% down payment options:
1. One is the VA loan for Veterans, Active Duty Personal and Surviving Spouses of military personal that passed from serviced connected disabilities (if you think you are a Surviving Spouse or are eligible for this benefit please reach out to me and I can help discern if you are).
Our Military Personel and Veterans are a cherished part of our country. You fought hard to protect and serve our country in both times of war and peace, and for your bravery the Veterans Administration offers the benefit to purchase a home with 0% down payment and no monthly Mortgage Insurance (PMI). This is a benefit and our Underwriters work hard to approve the loans of our Veterans and those on Active Duty to get you into a house! They are wonderful loans and can even make sense to be used when you are putting down more than 0%, check with me to find out when we would still use your VA benefit even if you have down payment set aside.
2. A second 0% down payment option is through the USDA Rural Development program and is for people buying in rural areas (for the KC metro we are looking at places like South Gardner, Edgerton, Spring Hill, East Leavenworth, Kearney, Eudora, Grain Valley, Pleasant Hill and many other great rural communities just outside the KC metro area. There are income limits for this program so pease check with me to see if you qualify.
1.5% and 3.5% Down Payments
Through the FHA we have down payments at 1.5% and 3.5%. The FHA loan is a phenomenal loan and while it has been known as a “First Time Home Buyers” loan it really can be used by just about anyone looking to buy a primary home, whether they be first time home buyers or not. Normally the FHA requires a 3.5% down payment, but we currently have an option for a down payment assistance program to pay for 2% of the down payment, making your total out of pocket down payment cost come to just 1.5%. There are some caveats to the program so you will want to check with me to find out if you qualify or if this specific 1.5% down payment program makes sense for you, but the point is we are working to make sure that down payment is not a barrier to YOU buying a house!
For everyone else through the FHA and to get access to your lowest interest rate options, the standard 3.5% will be more of the norm. The FHA loan has many benefits which can include easier credit guidelines and standards, it’s a better fit for those with lower credit scores, or higher debt to income ratios (people lets say coming out of college with a lot of school loans, etc).
3% and 5% Down Payments
These are down payments for the standard “Conventional” loan type. Previously this would be the type of loan that people would always tell me “But I heard you have to have 20% down payment to buy a house using a Conventional Loan!”. This simply is not true. Conventional Guidelines have eased up greatly in the past 2-3 years including lowering down payments and lower PMI (or monthly mortgage insurance for people putting down less than 20%). We even have ways for you to AVOID PMI (or monthly Mortgage Insurance) completely… even if you are putting down less than 20%! Ask me how we can do this. I have seen this option save people anywhere from $50-120 a month!
But what if I have 7% or 10% or even 20% I want to put down?
Congratulations! There is absolutely nothing wrong with having and wanting to put down more down payment on your house than just the minimum allowed (as noted above). I have even had borrowers ask me, what if I just want to put down $XX,XXX dollars, is that okay or does it have to be a certain %? Absolutely you can put down whatever amount you want to at the end of the day. That is up to you to decide, but I would definitely recommend talking with me first, because sometimes the difference of putting down say 9% vs 10% can make a MAJOR change to your loan terms (ie, the rate you get or the PMI or Mortgage Insurance you pay).
How do I know what down payment options I qualify for?
That is where things can get tricky… a person searching and researching on their own could easily be overcome by all the loan options available these days. You might even be reading through this blog post thinking “Whoa! Those are a lot of down payment options! How do I know what down payment options I qualify for?”. Well the answer is… you, looking on your own, may struggle to figure that out. I recommend reaching out to me via phone/text at 913-735-5363 or email at firstname.lastname@example.org and with just a handful of questions I can determine not only which down payment options you qualify for, but what type of loan in general will make the best sense for you.
As always these consultations are NO CHARGE and of NO OBLIGATION to you to use me as your lender. I know it may sound cliche or cheesy, but I have been absolutely blessed to find a career in which I LOVE to be in! Me and numbers and guidelines go together like Bacon Lettuce and Tomato. And helping people get into their first home, their next home, their vacation home or just the Home of their Dreams is my passion and icing on the cake!
PS, If it sounds like I can help you, please contact me directly through LinkedIn, Facebook, or email me at email@example.com or call/text me at 913-735-5363. If you’re not yet ready for a conversation, but you’d like to learn more about me and how I can help you or about the mortgage process in general, including great blog posts to send out to your clients, check out my website at http://www.michaelbakerhomeloans.com.