Mortgage Down Payment FAQ

    Mortgage Down Payment FAQ
    How can I buy a house with no money down?
    In order to buy a house with no money down, you’ll just need to apply for no-money-down mortgage. If you don’t which mortgage loan is your best zero money down option, that’s okay. A mortgage lender can help steer you in the right direction. There are multiple 100 percent mortgages available for today’s home buyers.

    Can cash gifts be used as a down payment?
    Yes, cash gifts can be used for a down payment on a home. However, when you’re receiving a cash gift, you’ll want to make sure you follow a few procedures.

    For example, make sure the gift is made using a personal check, a cashier’s check, or a wire; and keep paper records of the gift, including photocopies of the checks and of your deposit to the bank. Also, make sure that your deposit matches the amount of the gift exactly.

    Your lender will also want to verify that the gift is actually a gift and not a loan-in-disguise. Cash gifts do not require repayment.

    What are the FHA down payment assistance programs?
    FHA down payment assistance programs are available to home buyers and 87% of U.S. single-family homes potentially qualify. Programs will vary by state, so be sure to ask your mortgage lender for which programs you may be eligible. The average home buyer using down payment assistance receives $11,565.

    Are there any home buyer grants?
    Home buyer grants are available to U.S. home buyers and all are eligible to apply, which are also known as down payment assistance (DPA) programs. DPA programs are widely-available but seldom used — 87% of single-family homes potentially qualify, but less than 10% of buyers think to apply. Your mortgage lender can help you determine which DPAs are best for you.

    What are the FHA loan requirements?
    The FHA loan requirements are; 1.) You must have a credit score of at least 500; 2.) Income which can be verified using W-2 statements and paystubs, or federal tax returns; 3.) No history of bankruptcy, foreclosure, or short sale within the last 12 months. 4.) You must not be delinquent on your federal taxes, your federal student loans, or any other federal debt.

    What are the benefits to putting more money down?
    Just as there are benefits to low and 0 money down mortgages, there are benefits to putting more money down on a purchase. For example, when you put more money down on a home, the amount you need to mortgage is less, which reduces your monthly mortgage payment. Additionally, if your mortgage requires mortgage insurance, with more money down, your mortgage insurance will “cancel” in fewer years.

    If I make a low down payment, do I pay mortgage insurance?
    When you make a low down payment, you’re more likely to pay mortgage insurance (MI), but not necessarily. For example, the VA Home Loan Guaranty program doesn’t require mortgage insurance, so if you use a VA loan, making a low down payment won’t matter. FHA loans will carry PMI for the life of the loan.

    The only loan for which your down payment affects your mortgage insurance is the conventional mortgage. The smaller your down payment, the higher your monthly PMI. However, once your home has twenty percent equity, you’ll be eligible to have your PMI removed.

    If I make a low down payment, what are my lender fees?
    The size of your down payment doesn’t relate to your lender fees. No matter how large or how small your down payment, your lender fees should remain equal. This is because mortgage lenders are prohibited from charging higher fees based on the size of your down payment . It should be noted, however, that different loan types may require different services (e.g.; home inspection, roof inspection, home appraisal), and this may affect your total loan closing costs.

    What is the minimum down payment for a mortgage?
    The minimum down payment for a mortgage are:

    VA loan: 0% down payment
    USDA loan: 0% down payment
    Conventional 97 mortgage: 3% down payment
    HomeReady™ mortgage: 3% down payment
    FHA loan: 3.5% down payment
    In addition to the above programs, down payment assistance programs are often available and provide, on average, more than $11,000 to today’s buyers of homes.

    How can I fund a down payment?
    A down payment can be funded multiple ways, and your lender will often be flexible. Some of the more common ways to fund a down payment is to use your savings or checking account; or, for repeat buyers, the proceeds from the sale of your existing home.

    However, there are other ways to fund a down payment, too. For example, home buyers can receive a cash gift for their down payment or can borrow from their 401k or IRA.

    Down payment assistance programs can fund a down payment, too. Typically, down payment assistance programs grants money to home buyers with the stipulation that they live in the home for a certain number of years — often 5 years or fewer.

    Regardless of from where you fund your down payment, though, make sure to keep a paper trail. Without a clear account of the source of your down payment, a mortgage lender may not allow its use.

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