21 Oct Many Buyers Are Wrong About Down Payment Requirements
Many Buyers Are Wrong About Down Payment Requirements
The majority of home buyers still believe that you need a 20% down payment for a home. This is simply not true. There are many mortgage loan programs on the market that don’t require a 20% down payment. Feel free to speak with a real estate agent or mortgage lender to see which mortgage loan program is best for you. If you’re on a the hunt for a luxurious home in Cabo, find out what type of loan may be right for you.
There are conventional fixed interest rate mortgages and conventional variable interest rate mortgages. There are conventional mortgages for different terms such as 30-year, 20-year or 15-year terms. If you put a 20% down payment on a home you will not need to pay monthly private mortgage insurance (PMI.) Conventional mortgages are a little more difficult to qualify for. The requirements for conventional mortgages are good credit, usually above 650 and sometimes higher. They are looking for people who are very financially qualified and have good income and low debt. There are ratios that must be met for income and debt. If a conventional mortgage isn’t attainable for you, there are a few other mortgage programs that you may be able to qualify for.
Federal Housing Authority (FHA) Loans
FHA loans are great for many first-time homebuyers and people who aren’t quite able to qualify for a conventional loan. FHA loans require as little as a 3.5% down payment. However, if you don’t put 20% down, you will have to pay monthly PMI. You may qualify for an FHA loan with a slightly little lower credit score. The debt-to-income ratios are a little more lenient, as well. The good news is that once you get 20% equity in your home you can ask your lender to have the PMI removed.
United States Department of Agriculture (USDA) Loans
The United States department of agriculture has a loan program for first-time homebuyers who purchase a home in an approved rural area. This loan is for people with lower incomes. There are lower income verification requirements that must be met. The USDA loans require a 0% down payment and they have lower closing costs. You do need a fairly good credit score to be able to qualify for a USDA loan.
Veterans Administration (VA) Loans
VA loans are for veterans or active duty service members of the United States military. Sometimes wives of veterans can be approved for these loans in certain situations. VA loans require zero money down and have lower closing costs. These mortgages are to give veterans and active duty service members the American dream of homeownership.
The lack of knowledge about down payment needs is keeping many qualified buyers from their dreams of owning a home. Currently, interest rates are at historical lows. You may not need to wait years to save money for a 20% down payment. You may be able to qualify for a mortgage right now. Be sure to talk to a real estate agent or a mortgage professional to see what your home buying options are at this time. It’s a great time to buy a home.