The home buyers of today's housing market actually don't need to pay a 20% downpayment. Yet a lot of people believe they need to. Most likely, the cause of this misbelief is that if you pay for a 20% down on a conventional mortgage it dispells the need for a private mortgage insurance.
Most of the times, home buyers (especially first time home buyers) tend to postpone their purchase because they don't think they can afford the downpayment. Home affordability isn't about whether or not you can afford the downpayment, it's about if you can be able to pay its monthly fee.
Paying a large downpayment leads you in paying less in your monthly payments but if you have taken too much of your life savings to pay that, it might not be a good idea to do so. Experts call this "house poor". If you're house poor you have little money left to spend for everyday expenses.
Making a downpayment that's less than 20% may be a conservatively safe decision to take if you're on a tight budget. IF you'd like to know what you can afford, click here to go through our pre-approval application.
Here are some Mortgages That Don't Need A 20% Downpayment.
- VA Loan
VA Loans are 100% financed. That means there's no need for a downpayment when getting a VA Loan. These are available to active military personnel, veterans, military spouses and other people in the defence sector of Government. It's administered by the Department of Veterans Affairs.
- USDA Loan
Like VA Loans, USDA Loans are also 100% financed and there's no need for a downpayment. It's administered by the Department of Agriculture and is available to many of the rural areas f the country and some suburban communities too.
- FHA Loan
Another Mortgages That Don't Need A 20% Downpayment is FHA Loans. It's insured by the Federal Housing Authority and allow up to 96.5 LTV. This means that you may be required to pay least a 3.5% downpayment. Unlike, VA&USDA Loans, FHA Loans does not have eligibility requirements. And you also don't need to have a perfect credit score to apply. Learn more about FHA Loans here.
- Conventional Loan
Administered by Fannie Mae and Freddi Mac, conventional loans allow up to 95% which means you may need to pay 5% downpayment. Conventional Loans are advised better for people that have a high credit score which means FHA Loans are more preferred for people with lower credit scores.
If you have more questions please contact us at (816)268-4025 or visit us on the web at KC Loan Tips.
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