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How Much Do I Have To Put Down To Purchase A Home??

March 24th, 2009 12:22 AM

Are you wondering how much of a down payment it takes these days to purchase a new home? Well, if you’ve listened to the nightly news since the credit crisis and mortgage meltdown began, you have probably heard that it requires a down payment of at least 20%, and a minimum credit score of 700. While it is true that mortgage guidelines have tightened in the last two years, it is not nearly that difficult to obtain a mortgage and realize the American dream.

A standard FHA loan currently requires only a 3.5% down payment, and a minimum credit score of 620 for most lenders. In some cases, borrowers with credit scores of 580 to 619 are also eligible. These guidelines are a far cry from the what the press has been reporting of late. It’s is still reasonably easy for most Americans to buy.

Let’s take a look at the different types of loans and their requirements:

FHA Loans- (Federal Housing Authority, which provides mortgage insurance for FHA approved lenders.)

As stated above, FHA requires a3.5% down payment. FHA does not have a minimum credit score requirement, but lenders place their own requirements and currently credit scores of at least 580 is what they are looking for. The maximum loan amount for FHA loans in Indiana is $271,050. If you are looking to borrow a higher amount than this, you may need a Conventional loan.

For more details on FHA Loans: http://www.indymortgagesource.com/FHALoans

Conventional Loans - There has also been a lot of talk on the news of late regarding GSE’s (Government Sponsored Enterprises). The GSE’s you have heard about recently are Fannie Mae and Freddie Mac. These are two separate entities that serve basically the same purpose…..they establish loan guidelines and facilitate the purchase of loans from Banks and other financial institutions to free up cash for additional lending. Fannie and Freddie loans are called Conventional Loans and have different requirements than FHA loans. The down payment minimum is typically 5% , though we have an option available for a 3% down conventional loan product, and the maximum loan amount is $417,000. Minimum credit scores vary depending on the down payment amount, but suffice it to say that these loans are for stronger credit borrowers than FHA.

There are a couple of ways to purchase a home with less than FHA’s 3.5% requirement:

VA Loans - (Veterans Administration) VA loans are reserved for Veterans of the armed forces. The VA offers home loans with no money down to qualified veterans. Most lenders are requiring a minimum credit score of 620. For VA loan details: http://www.indymortgagesource.com/VALoans

FHA Loan with a gift - Conventional loans mandate that your minimum down payment is made from your own money that you have saved up. FHA will allow you to receive a gift from an immediate family member to put towards the down payment and purchase of your home. The gift donor signs a gift letter stating that the gift does not have to be repaid.

FHA Loan Purchasing a HUD Property - A borrower taking out an FHA loan to purchase an eligible HUD home (a foreclosed property owned by HUD) may purchase said property with a down payment of only $100. For more details: http://www.indymortgagesource.com/HUDHomes

USDA Rural Housing Loan - (United States Department of Agriculture) Rural Housing loans are available with NO down payment. The property being purchased must be outside of city limits and there are income restrictions . For eligible properties and income limits: http://www.indymortgagesource.com/RuralHousing

Posted by Steve Jackson on March 24th, 2009 12:22 AMPost a Comment (0)