How much do you need for a down payment?
Putting 20-percent down on a house is great if you have it. But if you don’t, other options exist.
Do you have enough saved for a down payment?
If you’re like most homebuyers, you may be under the impression that it takes much more to buy a home than it actually does. The misconception that you must put 20-percent down to buy a house has been called the “most damaging down payment myth” since it deters many potential homebuyers from realizing their dreams of homeownership.
The answer to this "how much" question depends on the loan program you qualify for. Down payment requirements vary by mortgage program and can start as low as zero percent.
At Academy Mortgage, our Loan Officers have access to one of the largest loan product portfolios in the industry. This enables our Loan Officers to customize mortgages to help meet a variety of housing and financing needs. Some of our loan programs are designed specifically to benefit first-time homebuyers with low down payment and flexible qualification requirements. Others have benefits for repeat homebuyers.
These loan programs may help reduce or eliminate a down payment for homebuyers who qualify:
- VA: No down payment requirement for eligible Veterans, Active-Duty personnel, Reservists, and surviving spouses. Read more here.
- USDA: No down payment requirement for eligible homebuyers purchasing in rural and some suburban USDA-approved areas. Read more here.
- State Housing Loans: May offer low down payments and down payment assistance in the form of non-repayable grants for eligible underserved homebuyers. Read more here.
- HomeReady® and Home Possible® Loans: May provide down payments as low as 3-percent for low- to moderate-income homebuyers and those in certain underserved areas.
- Conventional Loans: As little as 3-percent minimum down payment. Read more here.
- FHA Loans: As little as 3.5-percent minimum down payment. Read more here.
Your local Academy Loan Officer can help you decide on a down payment amount that makes sense.
Will you have to pay monthly mortgage insurance?
With the exception of a VA Loan, which doesn’t require mortgage insurance, you’ll typically have to pay mortgage insurance when putting down less than 20-percent. Mortgage insurance is intended to protect a mortgage lender against a loan defaulting or entering foreclosure. The monthly cost will depend on your lender, loan type, credit score, and down payment.
According to the federal Homeowners Protection Act (HPA), there are generally two ways to remove Private Mortgage Insurance (PMI) from your mortgage:
- Request cancellation. You have the right to request that your loan service cancel PMI once you reach the date when the principal of your mortgage is scheduled to fall to 80-percent of the original value of your house. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you can’t find the disclosure form, contact your servicer.
- Wait for automatic cancellation. Even if you don’t request cancellation, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78-percent of your home’s original value. For your PMI to be cancelled on this date, you must be current on your payments. Otherwise, PMI won’t be terminated until shortly after payments are brought up to date.
The PMI example above only applies to Conventional Loans. The MIP (Mortgage Insurance Premium) on an FHA Loan must be paid for the life of a loan if you put down less than 10-percent; some homeowners choose to refinance to remove this premium.
Save yourself the stress of scrambling for a down payment
Could one of these loan programs lighten your load and put you on the path to homeownership? Contact your local Academy Loan Officer to have a quick conversation.
This is for informational and educational purposes only and not intended as an advertisement as defined by Regulation Z. Please consult a trusted professional as personal circumstances may vary. No specific results are guaranteed. MAC1123-1484077.