Downpayment   CONTENTS: List of all costs necessary to purchase a home. Downpayment levels & options

Out of pocket expense is the number one impediment to owning a home!

Which is why so many of the FSBO Registry Sellers offer to pay all or a portion of the Buyer's closing costs if you use one of our Lending Partners.

 

When buying a home you will need to budget for 3 different sets of costs:

Downpayment

Closing Costs

Prepaid Items

On this page we will focus on the many different levels of Downpayment. Closing Costs and Prepaid Items will be covered on other pages.

 

DOWNPAYMENT

Most people are aware of the need for a downpayment, but are not always aware of the many downpayment options available. (for a more detailed explanation of downpayment options see our Lending Partner web sites)

Many people think you need 20% down to buy a home, and that was right in the past, but it couldn't be any further from the truth any more. Today there are many ways to get into a home for $0 down although 3-5% is more common.

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To make you aware of some of your options I have compiled a synopsis of your options.

The following options are for Owner Occupied properties. Financing for Non Owner Occupied properties is also available, but usually at higher down &/or interest rates. (except for VA which does not allow loans on investment properties at all)

$0 down loans are available thru VA and Conventional loans and soon they might be available thru FHA (if they can gain control their foreclosure rate) as well. You must be a Veteran to secure a VA loan.

The standard Conventional loan requires a downpayment, but special loans are available at $0 down. Some are available with a total out of pocket of $500 and this includes all your Closing Costs and Prepaid Items! Many of these $0 down programs have a slightly higher interest rate than if put down 3-5%, but there are usually some special programs, like for teachers or policemen, which, depending upon your credit scores, might be available at lower than normal interest rates.

3% down loans are available thru Conventional, VA, & FHA loans at standard rates.

5% down loans are available thru Conventional, VA, & FHA loans at standard rates.

10% down loans are available thru Conventional, VA, & FHA loans at standard rates.

20% down loans are available thru Conventional, VA, & FHA loans at standard rates.

You may borrow a portion or all of your downpayment, but doing so weakens you in an underwriter's eyes. This means that unless you are exceptionally strong in credit, address & job stability and will have minimal housing payment increase, it would usually be better if you waited to purchase until you are close to saving all the money needed.

Having to borrow all or part of your downpayment tells an underwriter you must already be stretched to the limit since you obviously can't afford to save money and pay your present bills and housing expense. So if you have to borrow a portion of your downpayment it would be better if your monthly house expense isn't increasing significantly.

You can still buy a home if you have to borrow all or part of your money, it is just there may be some strings attached or a higher interest rate.

All loan types require that you invest a certain amount of money from your own funds so you need to check with one of our Lending Partners to see the requirements for your particular loan situation.