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While some homebuyers have a substantial down payment for their home purchase due to proceeds from an existing home sale, not all are able to put down as much money. It can be difficult to save a large amount of money. In addition, some folks prefer to not invest in a heavy down payment for leveraging, or other reasons. So what options are available for down payments?
The Veteran's Administration has the best of all home loans...no down payment required and with great rates! Of course, you must be eligible for a VA loan to receive this benefit. Most members of the military, veterans, reservists, and National Guard members are eligible to apply for a VA loan. Spouses of military members who passed away while on active duty or because of a service-connected disability may also apply. With VA loans, it is possible to purchase a home with less than $500 total out of pocket!
FHA allows for down payments as low as 3.5%. Not only does FHA allow for low down payments, but FHA is also flexible with credit score guidelines, allowing for lower credit scores than most conventional loans. The downsides to FHA loans are the mortgage insurance premiums (upfront and monthly), as well as limitations on purchases of some condos.
Fannie Mae and Freddie Mac loans allow for as little as 3% down payment. However, these loans come at a much higher cost than the more common 5% down option. Conventional loans have options for lender-paid mortgage insurance, which essentially allows you to finance the mortgage insurance in the rate, which often results in a lower payment and favorable tax benefits.
Contact us if you have questions about your specific situation regarding down payment amounts and the corresponding home purchase possibilities. We're happy to help!