SKIP TO MAIN CONTENT
Logo
  • About Us
    • Mortgages 101 Blog
      • Down payments explained
      • What is in a credit score
  • Team Directory
  • Calculators
    • Payment Amortization
    • Rent vs Own
    • Annual Percentage Rate
    • Debt Consolidation
    • Prepayment Savings
    • Early Payoff
    • Refinance Break Even
    • Tax Savings
  • Join Our Team
  • Contact Us
  • Log In

Mortgage Downpayments Explained

Do you really need to have 20% down to buy a house?

One of the most enduring myths of home buying is "You need to have 20% for a down payment." So many people believe this that you'd think it's carved in stone in the great hall of mortgage rules somewhere (no such place exists, to our knowledge!)

The truth is you can buy a home with a much smaller down payment - more like 3.5% to 5% for certain mortgages. So let's go through downpayments and clear up the mysteries of this little-understood part of buying a home.

What is a downpayment?

It’s a percentage of your home’s purchase price that you’re going to pay for in cash at closing. Typically, a down payment ranges from 3.5% to 20% of the purchase price.

Can you make a downpayment with a gift from a family member?

Yes, you can! Talk to your loan consultant about that as soon as you can. You'll most likely need to have a "gift letter" from the person providing the funds clearly stating that the money is truly a gift and not a loan.

What's the lowest downpayment option?

For non-Military home buyers, an FHA loan usually offers the lowest downpayment amount of 3.5%. But even though FHA loans come with a low downpayment, they may not be your best option. FHA loans require an up-front mortgage insurance premium (PMI.) Your home loan consultant will be able to help you weigh the pros and cons of this option.
 
If you’re active-duty or retired military, you can qualify for a VA mortgage, which comes with 0% downpayment options and no Private Mortgage Insurance. That’s great, but there are some “strings” attached. You will most likely need to pay what’s called a funding fee on your VA loan, which can be rolled into the total loan amount. The amount of the funding fee will depend on if you’ve ever used your VA benefit in the past.
 
If you have very good credit you might consider a 5% down Conventional mortgage. This can get you into a home with a competitive interest rate without requiring a ton of cash at closing. This option will require PMI, too, but the amount will be less than required for an FHA loan.

So, why does everyone say you need 20% down?

Because traditionally, you can get a lower interest rate the more you put down. The larger percentage of your home's price you have as a downpayment, the lower the risk is to a mortgage lender.

Also, if you put 20% down, you can avoid paying for Private Mortgage Insurance (PMI). Check out our blog post about PMI here.

Let's talk about your options

Nothing is "set in-stone" when it comes to downpayment choices! We have plenty of options available and your loan consultant will help you make the best choice for your situation. 

 

Apply online today for free and let's get started!

Apply Now
  • Company State Licenses
  • Privacy Policy
  • Consumer Complaint Policy

NMLS     |     FAIR LENDER     |     FAIR HOUSING

Copyright © 2018 First Mortgage Solutions, LLC –NMLS ID #244476. Offices located at 9237 Ward Parkway, Suite 300 Kansas City, MO 64114, (855) 222-5102. Licensed in California (License #41DBO-51145, licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act), Colorado (License #244476, Regulated by the Division of Real Estate), Connecticut (License #ML-244476), Florida (License #MLD1331), Georgia (Georgia Residential Mortgage Licensee #40649), Illinois Residential Mortgage Licensee #MB.6761285 – Department of Financial and Professional Regulation (100 W. Randolph, 9th Floor, Chicago, IL 60601, (312) 793-3000), Kansas (A Kansas Licensed Mortgage Company - #MC0025009), Missouri (License #14-1636), New Jersey (Residential Mortgage Lender License #244476, Licensed by the New Jersey Department of Banking and Insurance), North Carolina (License #L-175556), Oregon (License #ML-5613), (Pennsylvania (Registered as First Mortgage Direct – License #55072), South Carolina (MLS – 244476), Tennessee (License #128181), Texas (Department of Savings and Mortgage Lending), Virginia (License #MC-5877), and Washington (Consumer Loan Company License #CL-244476) . Equal Housing Lender. NMLS Consumer Access: www.NMLSConsumerAccess.org

9237 Ward Parkway, Suite 300, Kansas City, MO 64114

855.222.5102 

NMLS     |     FAIR LENDER     |     FAIR HOUSING

Copyright © 2018 First Mortgage Solutions, LLC –NMLS ID #244476. Offices located at 9237 Ward Parkway, Suite 300 Kansas City, MO 64114, (855) 222-5102. Licensed in California (License #41DBO-51145, licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act), Colorado (License #244476, Regulated by the Division of Real Estate), Connecticut (License #ML-244476), Florida (License #MLD1331), Georgia (Georgia Residential Mortgage Licensee #40649), Illinois Residential Mortgage Licensee #MB.6761285 – Department of Financial and Professional Regulation (100 W. Randolph, 9th Floor, Chicago, IL 60601, (312) 793-3000), Kansas (A Kansas Licensed Mortgage Company - #MC0025009), Missouri (License #14-1636), New Jersey (Residential Mortgage Lender License #244476, Licensed by the New Jersey Department of Banking and Insurance), North Carolina (License #L-175556), Oregon (License #ML-5613), (Pennsylvania (Registered as First Mortgage Direct – License #55072), South Carolina (MLS – 244476), Tennessee (License #128181), Texas (Department of Savings and Mortgage Lending), Virginia (License #MC-5877), and Washington (Consumer Loan Company License #CL-244476) . Equal Housing Lender. NMLS Consumer Access: www.NMLSConsumerAccess.org