This ARTICLE On Down Payment Requirement And Mortgage Guidelines Was PUBLISHED On September 11th, 2019
We know saving for a house takes time and discipline.
- At Gustan Cho Associates, we help many clients tackle the mortgage buying process
- One of the main obstacles preventing Americans from buying a home is the down payment requirement
- Even with today’s low-down-payment options, saving enough to close on a mortgage is difficult
- In this blog, we will detail the down payment requirements with the different loan types
- We will discuss a brief summary of down payment assistance programs, and tips to help you save for your down payment
In this article, we will cover and discuss the Down Payment Requirement And Mortgage Guidelines.
What Are The Down Payment Requirement On A Home Purchase
In a recent survey, a percentage of Americans thought the down payment requirement on a home purchase was 20%. This is 100% a myth. In fact, there are even no down payment options available in today’s mortgage market. See the different loan types and down payment requirements below:
- USDA allows 100% financing
- VA allows 100% financing
- FHA requires a 3.5% down payment
- Conventional requires a 3% down payment for first time home buyers AND 5% for a non-first-time home buyer
- NON-QM requires at least 10% down payment
Case Scenario On Home Purchase
$250,000 Purchase price:
- 3% down payment = $7,500 (conventional first-time home buyer)
- 3.5% down payment = $8,750 (FHA)
- 5% down payment = $12,500 (conventional non-first-time home buyer)
- 10% down payment = $25,000 (NON-QM)
Instances Where A Larger Down Payment Is Required
Those are the minimum down payment requirements per loan program, there are instances where you will need a larger down payment.
- An example of this is an FHA loan with credit scores of 579 or lower
- Any FHA mortgage with a credit score below 580 will require a minimum of a 10% down payment
- 10% is a large number, that is why we help many of our clients work on their credit until they get above the 580 marker
- Please see our blog on RAISING CREDIT SCORES more information
- Another example of needing a larger down payment could be a NON-QM loan
If you cannot provide verification of rent, a larger down payment is required.
Qualifying For Down Payment Assistance Programs
Gustan Cho Associates currently participate in multiple down payment assistance programs.
- These programs have different requirements at the state level but are available in most states
- Certain states such as Wisconsin have strict down payment assistance requirements
- Please give us a call for more information on your state
- The Chenoa Fund is one of the most popular down payment assistance programs available
- This program can cover your entire 3.5% down payment for an FHA loan or can be paired with the FANNIE MAE HOMEREADY conventional loan program
- Programs such as the CHENOA FUND, 2% GRANT, or state level down payment assistance programs are available through Gustan Cho Associates
We also offer Texas-specific down payment programs. Please see our blog on TSAHC requirements. Texas is one of our most active lending states where we are licensed. Give Mike Gracz a call on 630-659-7644 or send an email to firstname.lastname@example.org for more information on our down payment assistance programs.
Saving For A Down Payment For Home Purchase
Saving for a down payment will not be easy.
- It will require discipline and structure
- Over the years we have heard of many different strategies for saving money
- We will share a couple of good ideas with you
- In the year 2019, the majority of Americans are paid from their employer with a direct deposit
- Most of the time you can break this direct deposit up into more than one bank account
- I have had clients who set up a separate bank account at a separate bank to keep their money out of sight and out of mind
- Sending a portion of your paycheck to a separate bank account will help you consistently save money
- Another strategy many Americans use for the down payment is using their retirement funds
- Many retirement plans have specific withdrawal options if the money will be used to purchase a primary residence
Check with your retirement plan provider for further details. Typically, this is outlined in the terms of withdrawal.
Gift Funds For Down Payment On Home Purchase
Gift funds are also very popular for the down payment.
- Gift funds are typically from your family or sometimes your employer
- These can help bridge the gap from renting to homeownership
- If you have somebody who loves you, they may help you with your down payment
- Give funds are acceptable on most loan programs
For more specifics please see our blog on GIFT FUNDS.
Qualifying For A Mortgage With A Direct Lender With No Lender Overlays
Gustan Cho Associates are mortgage lending experts without LENDER OVERLAYS.
- We have helped numerous clients save for their down payment
- If you have been turned down by another lender, we encourage you to call us
- We are able to help more borrowers than most lenders due to lender overlays
- If you do not qualify, we will put you on a custom financial plan to qualify as soon as possible
- As stated above, the down payment is one of the biggest hurdles to jump over when buying a home
For any mortgage questions please call Mike Gracz on 630-659-7644 or email Mike at email@example.com! We are available seven days a week for any questions on down payments!