- For example, VA loan and USDA loan programs offer 100% financing and do not require any down payment form qualified mortgage loan borrowers.
- For FHA loan programs, the minimum down payment required is 3.5% down payment if you have a 580 FICO credit score or higher.
- If your credit scores are under 580 FICO, then FHA requires a 10% down payment.
- Minimum down payment for conventional loan programs is 5% down payment for single family homes and town homes.
- However, down payment requirements can be higher on condominiums depending on the state.
- Condominium loans are deemed riskier for mortgage lenders.
- Any conventional loan that is higher than a 80% loan to value, private mortgage insurance will be required by the mortgage lender.
- With conventional loans, the lower your down payment is the higher your mortgage rate will be.
- The more down payment you put down, the less of a risk factor the mortgage loan borrower is and that is why higher down payment mortgage loans have lower mortgage rates.
2 To 4 Unit Mortgage Loans
- Any properties up to 4 units is considered a residential property and residential mortgage loan guidelines apply.
- If a home buyer is planning on purchasing a 2 to 4 unit property, FHA requires a minimum down payment of 3.5% down payment and the home buyer needs to occupy one of the units.
- The remaining units can be used towards income.
- Up to 85% of the potential rental income of the other units can be used towards income.
- For conventional loans, 15% down payment is required for 2 to 4 unit residential properties and up to 75% of the potential rental income can be used towards income calculation of the borrower’s debt to income ratios.
Jumbo Mortgage Loans
Any mortgage loan over $417,000 is considered a jumbo loan. Minimum down payment for jumbo mortgage loans is 20% down. There are jumbo mortgage lenders that will lend up to 90% loan to value, thus requiring only a 10% down payment. Again, lower down payment mean higher mortgage rates because the mortgage lender has more risk.
Condotel Financing And Non-Warrantable Loans
Condotel mortgage loans and non-warrantable condominium loans are portfolio loans and require a 25% minimum down payment. Portfolio loans are 30 year mortgage loans but only adjustable rate mortgage products are available. There are 3/1 ARM, 5/1 ARM, and 7/1 ARM mortgage loan programs. For example, on a 7/1 ARM with a starter rate of 5.75%, the rate is fixed for the first 7 years and will adjust from years 8 to 30 based on the index. The margin is constant.
Investment Property Mortgage Loans
20% minimum down payment is required for investment homes if the rental income do not be used.
- For 75% of the potential rental income to be used, the minimum down payment required on investment homes is 25% down.
- For example, if an investment home has a potential rental income of $1,000 and the borrower needs to use the potential income to qualify for their debt to income calculations, then the home buyer needs to put 25% down payment instead of 20% down payment.
- By putting 25% down payment, 75% of the potential $1,000 or $750 can be used as part of the borrower’s income in qualifying for their debt to income ratio.
- If the home buyer of the investment home only puts down 20% down payment, the potential rental income cannot be used.