Today I want to share with you the answer to the most common I get from home buyers, especially first-time homebuyers. I really feel bad for so many buyers I encounter who don’t know the right answer to this question because the answer brings so much hope and helps people own their own home much sooner than they thought possible.
That question is: “How much downpayment do I need to buy a house?” I’ve had many potential home buyers ask me this question and most have the perception that they need 20% down to purchase a home! That might have been true 30 years ago, but today they are many mortgage options for buyers to purchase a home with much less of a downpayment. The most common options include:
- 0% downpayment with a USDA loan. Only certain areas qualify for a USDA loan and this loan requires a slightly better debt-to-income ratio that other loans, but it is a great option for someone who has no money for a downpayment
- 3.5% downpayment with a FHA loan. This loan is probably the most common loan first-time home buyers use and has some of the lowest requirements to qualify.
- 5% downpayment with a Conventional loan. Conventional loans require a higher credit score but can provide a lower monthly payment amount for buyers because it has a lower cost for mortgage insurance. There are conventional loan programs for 10% or 20% down as well that might have better terms and some lenders even offer a conventional loan with only 3% down.
Those are the three most basic types of loans, but the most important thing to know is that there are many ways you can purchase a home with a relatively small downpayment.
If you are considering a move in the Austin area, contact me because I help people like you move smart.