How much do I need for Down Payment?
Is There a Zero Down Payment Mortgage?
What is the Minimum Down Payment?
Do I have to have 20% down payment?
These are very typical questions regarding down payment that I hear every day as a mortgage loan officer. There is a lot of misunderstanding and lack of knowledge when it comes to mortgage down payment, especially so within the media. For instance, you do not need 20% down payment to purchase a new home.
MINIMUM DOWN PAYMENT OPTIONS:
There are two great mortgage programs that allow for a ZERO down payment, that's right zip, nada, nothing, etc. The USDA Rural Development and the VA Mortgage Program does not require a down payment along with the added value of super low interest rates in normal conditions.
The FHA Mortgage is referred by many as the first time home buyer home loan, not only because of the easier underwriting, lower required credit scores, and higher debt ratios but because of the minimum down payment requirement of only 3.5% of the sales price!
Conventional mortgages are those insured by either Fannie Mae or Freddie Mac, this is the loan program that many think requires at least a 20% down payment. For the most part conventional mortgages have a minimum down payment requirement of only 5%! Recently, Fannie Mae came out with a new mortgage program that has very relaxed underwriting guidelines that only requires a 3% down payment.
Down Payment Assitance or Grants:
In the St. Louis area including St. Charles and Jefferson County there are basically 2 down payment assistance programs available though one of the down payment assistance programs is coordinated with your mortgage lender through several different groups.
MHDC; some time referred to as First Place Loans. This program is offered through the State of Missouri and is provided throughout the state and not just the St. Louis Mo area. This program is strictly for First Time Home Buyers, a first time home buyer is basically anyone who has not owned a home or had the advantage of home ownership over the past 3 years.
This down payment assistance program can only be provided through approved mortgage lenders, not all lenders in the area want to work with the MHDC program.
This program will provide up to 4.5% of the loan amount for down payment and closing costs assistance. This makes this a very good program to work with the FHA mortgage minimum down payment requirement of 3.5% and then you have a little extra to apply to closing costs.
1st Home Program;This payment assistance is also only for first time home buyers. The program is available in St. Louis City, St. Louis County with Florissant having their own separate version of the same program, Jefferson County, and St. Charles County plus with nearly every city/entity in the county having a version of this program.
There are income restrictions, guideline restrictions, underwriting restrictions, and more that I highly suggest that you only work with a mortgage loan officer very experienced with down payment assistance. Don't lose the money that is available to you or create delays that can happen because of lack of experience.
More Options to Help
23 Down Payment Options! There are a lot of options listed within the FHA and Conventional mortgage underwriting guidelines that tell mortgage loan officers where home buyers can obtain their down payment. The FHA mortgage programs lists 23 options that may be something you can do already, here are some favorites and some not so well known;
- Savings (of course)
- Gift (this is used a lot)
- 401k or other retirement plan
- Down Payment Assistance
- Sweat Equity
- Employer Assistance Program
- Savings at home (mattress money)
- A family member loan
- Sale of personal property
These are just a few of the ideas and options available to you to help fund you down payment.
CLOSING COST HELP; there are always closing costs involved in the process of buying and financing a new home purchase, over and above your down payment. Having those closing costs paid for by you is sometimes as much as the down payment but always a cost that can be avoided.
There are many options available to you to have most if not all of your closing costs paid for by others and not you. It takes a consolidated team effort of your, your mortgage lender, and your real estate agent to make this happen. But it is possible that through your mortgage program, down payment assistance, seller concessions, and lender credits that it can become possible to purchase a new home with little to zero out of pocket expense.
YOU BUY YOUR NEXT HOME WITH LITTLE TO ZERO OUT OF POCKET!