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Do I Need 20% Down to Buy a House?

Posted on the 26 January 2012 by Homesmsp @HomesMSP

I have been asked more than once if you still have to have 20% (or more) down in order to buy a home.  I think with so many different stories out in the media, no one is really sure!  I just had a client email me last week asking if he had to put 20% down to buy a new home.

There are many options available for all buyers, first time homebuyers to repeat buyers.  The minimum down is zer0 - but only for those that qualify for VA home loans or USDA rural development loans!  There are some programs available at 3% down for first time homebuyers typically.  They are a My Community homebuyer loan and you need to be under specific income limits and also have a high enough credit score.  These loans are not as common as they used to be.  Most people that are buying with less than 5% down are using FHA loans.

FHA is one of the most common ways to buy a home with less than 5% down, you need 3.5% down and the interest rates are fantastic!  The monthly mortgage insurance is now higher than it used to be but it's still a great option!

Conventional loans are available with as little as 5% down.  You will need to pay mortgage insurance unless you put 20% down, but it's still a good option.  If your credit score is over 700 and you have 5% down of your own money, I would usually recommend doing a conventional loan over FHA due to the mortgage insurance.

Another option is to put 10% down and get a second mortgage for 10% down, by doing this you can avoid the mortgage insurance, but you will have a second mortgage to pay for.  With this option, you need to compare the costs between the second mortgage and MI and see which one makes more sense for you to do.

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