How Much of a Down Payment Do You Really Need ?

For many first-time homebuyers coming up with enough cash for a mortgage down payment can seem like an impossible goal. Lenders throw out the 20% number and a lot of home ownership dreams get pushed into the dream-deferred file. This is understandable. A 20% down on a $400,000 mortgage comes to $80,000, an intimidating amount in a time of stagnant salaries and underemployment.

That steep percentage does come with some benefits. First, lenders will like you better and your chances for a loan approval will go up. In many cases there will be a better mortgage interest rate offered and you will have lower up front fees. Most importantly, there will be lower monthly payments with 20% down. Still, that’s a big chunk of cash to cough up. But 20% isn’t etched in stone.

The truth is that you can buy a home with as little as 3% down. Really.

The Federal Housing Administration (FHA) takes an active role in helping homebuyers- especially first-time homebuyers- get approved. The FHA doesn’t make loans, but assists mortgage lenders in issuing loans by guaranteeing a portion of the balance. In this way a much smaller down payment is required, as little as 3.5%. Even better, Fannie Mae and Freddie Mac, the government-sponsored companies that drive the residential mortgage credit market, have approved 3% down payments on home mortgages. And just not to be left in the dust, several major commercial lenders are offering very low or zero-down loans.

If you are a veteran, there are benefits available in gratitude for your service. The Department of Veteran’s Affairs administers a program that may qualify you for a zero-down mortgage and a competitive interest rate.

That dream of home ownership suddenly seems a lot more attainable.

The truth is that the 20% down payment rule carries with it a lot of benefits that will pay off over the long run, and if financially feasible, is a smart way to buy a house. But for hopeful buyers without large cash resources, any one of a number of low down payment programs can be put into action to make a home purchase attainable.

The brokers at Premier Funding Network understand that there are buyers with all kinds of financial situations and their long history in the mortgage field has prepared them to handle almost any borrower requirement.

Give us a call at 714 283-9900 and let’s go over all the loan options and details like up-front fees and eligibility. The sooner we talk, the sooner you will be in that dream home, wondering why you ever doubted that it would happen.