Low Down Payment Mortgage Options
Trying to figure out how much of a down payment you need to buy a home? You're not alone. A lot of home buyers have questions about down payments, like how big of a down payment do I need. So to help you make the best decision, here's what you need to know about down payments.
What is a Down Payment?
A down payment is the money you pay upfront when you buy a home; it’s your initial investment. Your down payment is combined with your mortgage to fulfill the entire purchase price of the home. While your mortgage is borrowed money, your down payment typically comes from your own funds, or through some form of down payment assistance.
Is a Down Payment Required to Buy a House?
You’re not always required to use a down payment to buy a home. Some of the mortgage programs you’ll see below don’t require a down payment (USDA and VA). If you meet the requirements to use one of these programs, you can buy a home for your primary residence without providing money for a down payment.
Is Down Payment Assistance Available?
You can definitely get help with your down payment! Here are a few common forms of down payment assistance:
A family member can provide part, or all, of your down payment as a gift.
Many local government programs offer assistance, usually through a small 2nd mortgage or grant money. Our Down Payment Assistance Tool can help you see what assistance is available in the area where you want to buy.
What Down Payment do I Need to Buy a Home?
Luckily you don’t have to provide a big 20% down payment to get a good mortgage, so don’t worry about selling your kidney or robbing a bank! There are a lot of mortgage loans with affordable down payment options. Here are some low, and no, down payment mortgage options you can use to buy a new home:
USDA home loans are extremely popular because they're a no down payment mortgage with great interest rates. They’re also very affordable. USDA home loans are sometimes called a Rural Housing Loan because the property must be located in a rural area, but the definition of rural is pretty broad. Only a few places around Cache Valley are not eligible for a USDA loan.
0% down payment, 30 year fixed rate mortgage,
4.624% annual percentage rate as of 6/13/2018
580 credit score required
VA home loans are another great no down payment mortgage program. They offer some of the best interest rates and have very favorable terms, plus VA home loans don’t have monthly mortgage insurance. VA loans are available for Veterans, Service members, and their families.
0% down payment, 30 year fixed rate mortgage,
4.467% annual percentage rate as of 6/13/2018
550 credit score required
Conventional home loans typically have faster closing times, less strict appraisals, and more flexible terms than other mortgage programs. Conventional home loans also have lower mortgage insurance costs. They don’t require upfront mortgage insurance and you can get rid of monthly mortgage insurance once you’ve reached 20% equity in your home.
3% down payment, 30 year fixed rate mortgage,
4.856% annual percentage rate as of 6/13/2018
620 credit score required
3% Down Payment - Renovation Home Loan
Renovation home loans can change the way you look at a fixer-upper! With a renovation loan you can include the cost of home improvements or upgrades in the same mortgage used to purchase the home. For example if you wanted to buy a $200,000 home and make $12,000 in upgrades, you could combine those costs into one mortgage with a low down payment.
3% down payment, 30 year fixed rate mortgage,
6.274% annual percentage rate as of 6/13/2018
620 credit score required
FHA home loans have more flexible guidelines than other mortgage programs, which can make it easier to qualify for a mortgage in certain situations. FHA loans allow lower credit scores and higher debt limits. They also offer favorable interest rates than can be lower than what you could get on a conventional home loan.
3.5% down payment, 30 year fixed rate mortgage,
5.230% annual percentage rate as of 6/13/2018
580 credit score required
Common Down Payment Questions
Here are a few other questions about down payments and mortgage loans we hear quite often.
1. Where can My Down Payment Money Come From?
You can provide your down payment from a lot of different sources including:
Checking and Savings Accounts
Retirement Accounts
Tax Refund
Investment Accounts
Inheritance
A Gift from a Family Member
Down Payment Assistance - grants and second mortgages
Sale Proceeds - like money from the sale of your current home or a 4 wheeler
2. Why is a 20% Down Payment Mentioned a lot?
The reason so many individuals and mortgage lenders mention a 20% down payment is because it can help you avoid mortgage insurance. Mortgage insurance increases the cost of your loan, either through a higher interest rate or a larger monthly mortgage payment, and is required on conventional home loans with less than a 20% down payment.
Recently we've been hard at work negotiating cheaper mortgage insurance costs on your behalf! So if you're required to have mortgage insurance, we'll help you save money with our significantly cheaper mortgage insurance costs.
3. Can I Protect My Down Payment?
You've worked hard to save up a down payment and you deserve to know that your money is safe. That’s why we offer down payment protection on some of our Conventional and FHA mortgage loans at no extra cost! It’s like an insurance policy that helps you recover up to the full amount of your down payment in certain situations. Learn more about Down Payment Protection here.
4. Which Down Payment Option is Best for Me?
Determining the best down payment option for you depends on a few different things, like your credit scores and the location of the home you’d like to buy. The best way to pick a down payment option is to meet with one of our loan officers. They can review your information, answer your questions, and guide you to the best mortgage loan for your situation. If you’d like to get started, you can schedule a mortgage appointment.
