How much do you need for a down payment?

Many buyers think you need 20% down and that is not true. You can buy a home with a conventional loan with as little as 3% down.

So what is the minimum you need to buy a home?

VA loans allow eligible veterans to buy a home with zero down! An awesome option for those that qualify.

USDA loans also allow you to buy a home with zero down. For a USDA loan, you need to purchase a home outside the metro area. There are maps on the USDA website that show the eligible areas and also income limits in those areas.

FHA requires you to put at least 3.5% down.

Conventional loans allow for a minimum of 3% down. You will pay mortgage insurance if you put less than 20% down, but the MI will go away when you have enough equity in your home.

There are a few different loan options for those wanting to put 3% down:

  • Conventional 97 Home Loan:  (offered by Fannie Mae/Freddie Mac): Requires 3% down, 620-660 FICO credit score minimum, 50% DTI maximum, 97% LTV ratio maximum, must be a first time homebuyer
  • Fannie Mae Home Ready Loan : Requires 3% down, 620-680 FICO credit score minimum, 50% DTI maximum, 97% LTV maximum, annual income can’t exceed 80% of median income for that area
  • Freddie Mac Home Possible Loan: Requires 3% down, 660 FICO credit score minimum, 43%-45% DTI maximum, 97% LTV maximum, annual income can’t exceed 80% of median income for that area
  • Freddie Mac Home One Loan: Requires 3% down, 620 FICO credit score minimum, 45% DTI maximum, 97% LTV maximum

Not everyone can qualify for a loan at 3% down, but you can also do as little as 5% down. The benefit to putting more down is that it lowers your payment, may also lower your interest rate and your mortgage insurance. Sometimes you need more down to get a loan approval – it may be due to your credit score, debt to income or just the overall file. I have had files where 3% doesn’t get an approval but 5% does. Remember that if you are buying a home, you can get a gift to help with the down payment and closing costs. Also as the housing market it changing, it may be easier to get the seller to contribute towards your closing costs. That way the money you have can go towards your down payment.

If you aren’t sure of your own situation, talk to your loan officer. We are here to answer questions and help you figure out the best way for you to buy your home!

Leslie Vanderwerf,  NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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