Monday, February 22, 2010

The Official Down Payment Requirements

Here are the down payment requirements for the various types of loans:

Conventional (non-government) loans:
• For most conventional loans, the minimum down payment requirement is 5% for primary residences, 10% for second homes, and 15% for investment properties.
• If the property is a primary residence, there are special loan programs that only require 3% down, but the interest rates are higher than regular conventional loans.
• IMPORTANT NOTE: The mortgage insurance (MI) companies have stricter guidelines than the lenders do. If the loan is for more than 80% of the sales price, the MI guidelines must be followed. Typically, the MI companies require 5% down, unless the borrower is a first-time homebuyer (no ownership in the past 3 years). The MI companies also base the down payment requirement on the borrower’s credit score and whether they consider the house to be in a “restricted market”, meaning values are going down.
• Some foreclosed houses that are owned by Fannie Mae only require 3% down.
• The only way to tell for sure what the conventional down payment requirements are is to know the borrower’s financial information and the property address. If all that information is not available, then anyone telling you the down payment requirements is just making it up.

FHA loans:
• The minimum down payment is 3.5% of the purchase price.
• If the property is being sold by HUD (the house used to have an FHA loan, but is now in foreclosure), then it is possible to only need $100 down. There are restrictions to this program, primarily that the offer must be for the full listing price. If the offer is for more than the listing price, the borrower must pay the excess amount at the closing.
• FHA loans are insured by the federal government and there are no additional down payment requirements related to the mortgage insurance.

VA loans:
• There is no down payment requirement for properties up to $417,000. It is 100% financing.
• If the property is more than $417,000, then the borrower must bring 25% of the excess amount to the closing.
• VA loans are guaranteed (not insured) by the federal government, and no mortgage insurance is required.

No comments: