What does a typical down payment look like?

For years people have been told that you need to have a 20% down payment in order to qualify for a mortgage but that isn’t true! Putting that much down on a house will help you avoid mortgage insurance, but it may deplete your emergency funds. What does a 20% down payment look like? Let’s say you are looking at a house that’s listed at $300,000. The down payment would then be $60,000. If you are wanting to buy a home, but don’t have that kind of cash, there are many loan options that you may qualify for that require little to no down payment.

Programs with Low Down Payment Options

FHA Mortgage: 3.5% Down Payment

The Federal Housing Administration (FHA) is part of the government’s Housing and Urban Development (HUD) agency. FHA loans are meant to help buyers purchase homes a for a lower down payment. The loan is insured by the government which allows lenders to offer you better options for your mortgage. The buyer is required to pay mortgage insurance, but this allows them to potentially purchase a home for as low as a 3.5% down payment. This type of loan could be an excellent option for someone who has less money to put down. Loan limits do vary by county.

USDA Rural Housing: No down payment – Subject to Eligible Location

The USDA Loan is one of the few mortgage types that doesn’t require a down payment. The Eligibility for this loan depends on the location of the home you are looking to buy as well as income restrictions. Click here to see if your area qualifies. Even though this loan program offers a 0% down payment, the buyer will need to pay closing costs. These are determined closer to the closing date because they may vary by provider.

VA Loans: No Down Payment – Subject to Eligibility

This program is offered by the Department of Veterans Affairs exclusively for veterans of the U.S. Armed Services and isn’t available to the typical buyer. VA loans offer 100% financing and underwriting standards that are sensitive to a military family’s needs. This type of loan offers the flexibility to military families that may frequently relocate, receive housing allowances and, sometimes, are paid non-traditionally.

Conventional 97: 3% Down Payment

This program is offered to first-time and repeat home buyers. The Conventional 97 program is for single-unit homes only, which means that duplexes, tri-plexes, or four-plexes don’t qualify. The property will need to be your primary residence and is limited to a loan amount of $484,350 or less.