Down Payments - How much is enough?

Down payments, how much are enough?

If you did nothing but listen to the media – you might think that the minimum down payment on a home is 20%. This is far from the truth. Yet if this is the case, why do we still hear it referenced so often? Good question and let’s ponder that while we review the options that really do exist.

 Zero Down – While surprising to some, the Veterans Administration and the USDA programs both offer a zero down loan program for individuals and/or properties that meet the criteria. In some cases, deals can be structured where there would be little if any cash out of pocket at all. So not just no money down but no closing costs is possible too. There are also HUD properties available with as little as a $100 down payment for qualified applicants.

 Three Percent - There are Fannie Mae Community and HomePath programs that allow a down payment of just 3% down. This low down payment can even be funded by gifts, grant, unsecured loans from family, employers, government agencies or even by loans against assets such as CD’s and retirement accounts.

 Three and a Half Percent – Next up is the FHA or Federal Housing Administration. This loan program can allow as little as a 3.5% down payment. The FHA program is even more lenient that most on minimum credit scores and other factors. For those that are renting and can handle the payments yet just can’t pull together a large down payment, this is a great program to get you into a home of your own while prices and rates are still low.

 Five Percent – Good old fashioned Fannie Mae / Freddie Mac Conventional loans are available with as little as a five percent down payment. The minimum down on these programs can change dependent on things such as property type, credit score, occupancy, etc. Yet for most people purchasing a single family home, 5% is going to be a reasonably available option. With 5% down you also get other added benefits. With FHA your monthly mortgage insurance premium goes down by 5% and with Fannie Mae if you score high enough you can even buy out of your monthly mortgage insurance for a fee that can be paid by the client or by increasing the rate.

Local State & County Programs – Don’t forget about local State and County programs. They can be a great alternative to help with down payment assistance. For instance in Colorado CHFA, CHAC, DCHP and HOAP are just a few of the local programs that offer down payment assistance with a minimum contribution from the buyer of $1,000. There are many different qualifying requirements such as income, area and credit to name a few, so you should speak with a local loan officer in your area to find out if this product will be a good fit or not. There are pros and cons to these programs and you will need someone to walk you through.  

So why does the media have it wrong? – It’s easy to confuse the “news” with a public service. The reality is that it’s a business and in fact, one that’s become increasingly competitive. Used to be that news shows aired just a couple of times per day for a half hour. Now, there’s a proliferation of broadcasts on air 24/7/365 and they’re all clamoring for the next salacious headline to grab your attention and increase their ratings. They know that doom and gloom sells better than “happy” news and the more dreadful the stories, the more ad time the sell. The other issue is that many of the so called experts interviewed are not at all up to date on the many mortgage programs and the litany of ever changing rules and regulations accompanying them. If often seems like they only get their information from one another and repeat it so many times that they believe it to be fact. It takes everyday experience and knowledge to know what you’re doing in this business and that’s exactly what we offer. Reach out today and find out if you are ready to take advantage of low prices, historically low interest rates and as you know now, even low down payments.