"Do I need 20% down to buy a house"? I get this question all the time from potential home buyers and the answer is absolutely, maybe. Maybe, because it all depends on what you are looking for in a monthly mortgage payment. So you absolutely do not have to have 20% to buy a house, but you will have to pay mortgage insurance every month (in most cases) if you do not have 20% down to start out. So before you start to look at Collegeville Homes For Sale, take a look st some of the loan products below.
There are so many different types of loan products available that I couldn't possibly mention them all but below I will outline what can be done if you do not have 20% down to buy a home.
*FHA Mortgage- This is a very popular mortgage right now, especially with 1st time home buyers, but is not limited to those purchasing their 1st home. This is a very popular mortgage as it only requires a 3.5% down payment and currently allows for up to 6% in seller concessions (also known as a Seller Assist or Seller Paid Closing Costs). The rates on the FHA mortgage are practically the same as traditional conventional mortgages so there is a real benefit to this type of mortgage as it allows buyers to put down the 3.5% and essentially finance all of their closing costs as part of the mortgage. This mortgage does have monthly mortgage insurance that becomes part of your mortgage payment. So this is the "penalty" that you pay for not having 20% down.
*USDA Loan- This loan allows for 100% financing, however, there are income qualifications that you must meet in order to qualify, currently around $92,000 combined household income (including any working children). The home must also be in a qualified area. This is based on population density and the home must be in a area that falls under the maximum population for the loan product. You can again finance all of your closing costs by getting a seller assist as part of the sales price. The rate on this loan is also competitive with most of the types of loans. There is also monthly mortgage insurance that is part of the mortgage but it is significantly lower than FHA and lower than that of conventional loan products. Wondering if the area that you are looking at qualifies? Visit the USDA website
*Conventional Loan w/ Lender Paid Mortgage Insurance- This is a conventional loan with less than 20% down payment. This loan has a minimally higher interest rate, but you don't have to pay monthly mortgage insurance. Even though the rate is slightly higher the fact that you don't have to pay mortgage insurance gives you a lower monthly payment than if you were to take the lower interest rate of a conventional loan product and paying the monthly mortgage insurance premium.
*80/10/10 Loan- This is a loan that only a few lenders are still offering. This is where a buyer gets a 1st mortgage for 80% and 2nd mortgage from the same lender for 10% and then puts down 10% of their own money. This will allow you not to pay a monthly mortgage insurance premium as part of the payment, therefore saving money each month. The 10% loan is generally an interest only loan, so until you pay extra principal each month you aren't knocking down the balance on that loan.
*Conventional Loan- These types of loans range anywhere from 5% down all the way up to 99% down. If you choose a conventional loan product and put down 5%-19% you will pay a monthly mortgage insurance premium. The mortgae insurnace monthly is less than that of FHA, but still adds to your monthly mortgage payment. The amount of the monthly mortgage insurance is based off the loan amount, so the more you borrow the higher the mortgage insurance.
There are numerous other types of financing out there and to determine what loan product best suits your needs you should contact your local lender. You can always talk to my preferred mortgage lender to see what would work best for you. And when you are looking for a Collegeville Home For Sale feel free to give us a call. We can help you answer the question, "Do I need 20% down to buy a house".
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