First Time Homebuyer Information & Education

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Down Payment - How Much is Needed

In recent years a down payment on a mortgage when purchasing a home has been coming increasingly less common. Many consumers were buying homes without a down payment, also called 100% financing. However, with the recent trouble in the real estate and mortgage markets 100% mortgages are becoming increasingly difficult to obtain. The guidelines are getting more strict, the credit score requirements are increasing and the subprime market has just about completely rid themselves of 100% mortgage loans at the present time. There are many lenders however, that still do offer 100% home loan financing, and pretty good rates and financing terms as well. Many of these no down payment type loans are being done on the Fannie Mae MyCommunity Programs, the Freddie Mac Home Possible Programs or other Flex type programs as well.


Therefore, do not let the fact that you dont have a down payment get you down as there are still home loan programs available for consumers with no down payment. There just are not as many of these as there once were. The Fannie and Freddie loan programs are still fairly aggressive and approve loans that might not initially appear to fit the no down payment requirements. Talk with a mortgage professional, preferably 2 or 3 to see what everyone can offer you before you assume that you can not get approved.

How much Down Payment do I need? - Depending on the program you select and qualify for, your down payment can range from 0% down to 20% down. Contact your local mortgage professional [name] - 440-614-0130 to get pre-qualified for free as well as receive a free quote. From there you will have a firm idea on how much of a down payment you will need. You should get pre-qualified before you look at any homes to buy, let alone make any offers. Unless you have cash, the sale of the home is contingent upon you getting the financing. If you dont qualify in the first place then you end up wasting your own time as well as everyone elses involved.

The more money you put down, the more options you have for financing a purchases. If you have limited down payment funds, there are still plenty of avenues as well to obtain financing. Making an appointment with a mortgage professional is the first step in the home buying process.

To obtain a down payment as small as 3% you will need a good credit profile. Many programs today such as FHA do not look primarily at credit score as much as credit profile. If your debt to income ratios are low and you ave good consumer payment history you can get approved for 97-100% financing with scores into the 500's through FHA and my community loan programs.

No Down Payment Mortgages - A no down payment mortgages is a loan where the borrower does not provide money for the down payment. 100% of the home purchase is borrowed. A no down payment mortgage can be a good choice for first time home buyers.

For borrowers with credit that may not be perfect FHA and Fannie Mae My Community mortgage programs are the programs of choice. The rates are still low and they can help you avoid a higher rate sub prime mortgage.

If you qualify, a no down payment mortgage can be a great alternative to having to use your own funds to purchase a home. The money you save can be used for other things such as new furniture, home improvements, or put away for a "rainy day".

Many buyers mistakenly think that "No Down Payment" means that there is no money out of pocket when you buy a house. No down payment means you are financing 100% of the purchase price, there are also closing costs and other expenses that are paid through the process.

A very common and popular type of no down payment mortgage is a combo loan. A combo loan is a combination of 2 mortgage so that no down payment is required. Generally, the first mortgage will be 80% of the purchase price and the 2nd mortgage will be the remaining 20% of the purchase price. Thus you will be able to finance 100% of the purchase amount and not have to bring any money into closing for a down payment. Be advised that you still may need to bring money into closing for closing costs, but this can be negotiated at the time of making your bid on a home. If you would like more information on how to buy a home without having to pay any money for closing costs as well, please just ask me either by calling or emailing. The main advantage to a combo loan is that you are able to avoid PMI, private mortgage insurance by doing a combo loan instead of 1 loan. With 1 loan if you are borrowing over 80% of the value of the home, generally you will be required to pay PMI which is a costly insurance that protects the bank, not you.

 

Information listed above is to be used for educational purposes only and is not guaranteed

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