20% percent down…

20%The misunderstanding that 20% down is needed to buy a home keeps many homebuyers out of the market. Why pay exorbitant amounts of rent, or delay having security? You shouldn’t. So talking to the right people to become educated about your options is an essential step. There are numerous options available when buying which you’ll see at the end of this post. So where the magical 20% came from. Well, putting 20% down is what’s needed to avoid having to pay private mortgage insurance (PMI). Lenders require PMI on these types of loans because they are seen as higher risk, and the purpose is to protect the lender in the event of default. Buyers utilizing Veteran’s Administration (VA) loans don’t have to worry about this.

Homeownership is a great goal to achieve, and one that I strongly believe everyone should strive for. Not because I am in the business, but because it’s truly a way to have stability, better quality of life, and build wealth.

Don’t have 20% down:

  • FHA – 3.5% Down Payment – Benefits low down payment, higher debt to income ratios to qualify, down payment can be gift funds
  • Conventional – 3% or 5% down payment programs – Benefits, not as many restrictions for qualifying condo projects, gift funds ok, offers more likely to get accepted
  • Golden State Finance Authority – FHA and Conventional based program with 3% to 5% grant assistance for down payment and closing costs
  • USDA – 100% financing available – Restricted to Rural areas
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