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Your Mortgage: How low can you go?

Shawnee Mission Post Sponsor - June 4, 2019 10:00 am

 

By Michael Baker, Senior Loan Officer at Fountain Mortgage

I am not sure where the rumor started that you HAVE to have 20% down payment to buy a house today, but I am going to make it my single mission in life to correct the misinformation that is floating out there around down payments.

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We have down payments that start at 0%, 1.5%, 3%, 3.5%, 5% and on up from there. Let’s discuss where and when you might use or be eligible for these various down payments.

0% Down Payment
Currently there are two 0% down payment options:

    1.  One is the VA loan for Veterans, Active Duty Personnel, and Surviving Spouses of military personal that passed from serviced connected disabilities (if you think you are a Surviving Spouse or are eligible for this benefit please reach out to me and I can help discern if you are).
      Our Military Personnel and Veterans are a cherished part of our country. You fought hard to protect and serve our country in both times of war and peace, and for your bravery the Veterans Administration offers the benefit to purchase a home with 0% down payment and no monthly Mortgage Insurance (PMI). VA loans are wonderful loans and can even make sense to be used when you are putting down more than 0%. Check with us to find out when we would still use your VA benefit, even if you have down payment set aside.
    2. A second 0% down payment option is through the USDA Rural Development program and is for people buying in rural areas (for the KC metro we are looking at places like South Gardner, Edgerton, Spring Hill, East Leavenworth, Kearney, Eudora, Grain Valley, Pleasant Hill and many other great rural communities just outside the KC metro area. There are income limits for this program so please call us to see if you qualify.

1.5% and 3.5% Down Payments
Through the FHA, we have down payments at 1.5% and 3.5%. The FHA loan is a phenomenal loan, and while it has been known as a “First Time Home Buyers” loan, it really can be used by just about anyone looking to buy a primary home, whether they be first time home buyers or not. Normally the FHA requires a 3.5% down payment, but we currently have an option for a down payment assistance program to pay for 2% of the down payment, making your total out-of-pocket down payment cost come to just 1.5%. There are some caveats to the program, so you will want to visit with us to find out if you qualify or if this specific 1.5% down payment program makes sense for you.

For everyone else using an FHA loan to get access to your lowest interest rate options, the standard 3.5% will be more of the norm. The FHA loan has many benefits which can include easier credit guidelines and standards – it’s a better fit for those with lower credit scores – or higher debt to income ratios (for example: recent college grads with school and auto loans).

3% and 5% Down Payments
These are down payments for the standard “Conventional” loan type. Previously this would be the type of loan that people would always tell me, “But I heard you have to have 20% down payment to buy a house using a Conventional Loan!” This simply is not true.

Conventional Guidelines have eased up greatly in the past 2-3 years, including lower down payments and lower PMI (or monthly mortgage insurance for people putting down less than 20%). We even have ways for you to AVOID PMI completely… even if you are putting down less than 20%. Ask us how we can do this. I have seen this option save people anywhere from $50-120 a month!

But what if I have 7% or 10% or even 20% I want to put down?
Congratulations! There is absolutely nothing wrong with having and wanting to put more down payment on your house than just the minimum allowed (as noted above). I have even had borrowers ask me, what if I just want to put down $XX,XXX dollars, is that okay or does it have to be a certain %? Absolutely. You can put down whatever amount you want at the end of the day, as long as you meet the minimums for your particular loan. That is up to you to decide. But I would definitely recommend talking with us first, because sometimes the difference between putting down 9% vs 10% can make a MAJOR change to your loan terms (i.e. the rate you get or the PMI or Mortgage Insurance you pay).

How do I know what down payment options I qualify for?
That is where things can get tricky… a person searching and researching on their own could easily be overcome by all the loan options available these days. You might even be reading through this post thinking, “Whoa! Those are a lot of down payment options! How do I know what down payment options I qualify for?” Well the answer is… you, looking on your own, may struggle to figure that out. I recommend reaching out to our team at Fountain Mortgage or calling/texting me at 913-735-5363 or email at [email protected]. With just a handful of questions, I can determine not only which down payment options you qualify for, but what type of loan in general will make the best sense for you.

This weekly Sponsored Column is written by the employees of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268

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