How Much Down Payment Is Needed?


This week’s topic was inspired by a great question from Lisa in Arvada, Colorado. Thank you, Lisa!

To your question: There are several correct answers, so bear with me a moment, please. The minimum down payment for a conventional (non-government insured) mortgage is 20%. This can be lessened to 10% once your Mid-FICO score is 680+. I will fully address this topic another time and concentrate here on minimum down payment mortgages.

For Veterans, there are VA guaranteed home loans which have a minimum down payment of $500 plus closing costs (below).

The lowest cost loans for most are FHA guaranteed home loans – the minimum down payment is 3.5% of the purchase price. You are required to put 1% of your own money down. The other 2.5% can be gifted to you by family or a friend. The gift must be documented as a gift. There can be no evidence that the gift is a loan made to the buyers. TIP: The donor of the gift can borrow the funds and gift the funds to the buyer.

There are also minimal down payment purchases of foreclosed properties owned by FHA. These are known as HUD homes with a minimum down payment of $100. Keep in mind that most, if not all, of these properties need some work. For more information on HUD homes, talk with your Realtor.

In addition to HUD homes, there are other foreclosed properties owned by Fannie Mae and Freddie Mac which have a 3% down payment plus closing costs. And like HUD homes, most, if not all, of these properties need some work. Further know that seller concessions are minimal. For information on these opportunities contact your Realtor.

Closing costs range from 0-3%. Depending on the seller, there may be seller incentives (closing costs paid by the seller) for the buyer. This practice is common in a buyer’s market. For further information on this topic, contact your Realtor.

Image Credit: Google Images

Financially SpeakingJames Spray CCMB, CNE, FICO Pro | CO LMO 100008715 / NMLS 257365 | July 6, 2010
 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

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