You don’t need 20% down to buy a home

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blog-author-clayjeffreys3

I’ve often wondered why many people who talk with me about buying a home assume they need a 20% down payment. Since staring in the mortgage industry in 2007, I’ve always been able to offer a conventional loan with a 5% down payment to my clients. The only exception was a couple of months in early 2009 when the minimum down payment for conventional loans in Georgia was 10%.

From the sound of this CNN Money article published yesterday, it seems 5% down conventional loans are something new. The article says that several large banks are loosening the purse strings, offering loans with down payments that are as low as 5%.

What is frustrating about this article is that I can and have been able to offer conventional loans with as little as 5% down. Guess what? So have those same large banks. I don’t understand why media news and broadcast stories make it sound as if the only way to get a conventional loan is to come with a 20% down payment.

So we are all on the same page, here are some standard guidelines when it comes to the minimum down payment:

Conventional Loan: you need a 5% down payment and a 620+ credit score. There is PMI on the loan, but the down payment is only 5%.
Lender Paid PMI Conventional Loan: you can also qualify for this program with a 5% down payment and a 620+ credit score. There is no PMI monthly payment, but the interest rate is going to be higher than a 5% down conventional loan with monthly PMI payments.
FHA loans: you need a 3.5% down payment. Most lenders prefer a 640+ credit score though a few will still do as low as 600. The monthly PMI payments are significantly higher each month for FHA loans.

Did you notice the credit score requirements listed above? From news reports, it sounds as if you must use an FHA loan if you have an average or below average credit score. That’s not true. Lenders will now approve a 5% down conventional loan with a lower credit score than what most lenders will allow for FHA loans.

In short – don’t believe everything you see on TV or read on the internet. Contact a mortgage professional to get accurate information for the home loan process.

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One Response to “You don’t need 20% down to buy a home”

  1. The Sky is Falling….Well, Maybe Not. | The Mortgage Blog Says:

    […] can require as little as 3.5% down.  There are VA and USDA loan programs for 0% down.  Click here for more information on down […]

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