There are several different programs that can be used to finance a home purchase, and each one has its own down payment requirements. Here is a breakdown of some of the most common programs:
A conventional mortgage is a loan that is not insured or guaranteed by the government. Down payment requirements for a conventional mortgage can vary, but typically range from 3% to 20% of the purchase price. Borrowers who put down less than 20% will be required to pay private mortgage insurance (PMI).
An FHA (Federal Housing Administration) loan is a government-insured mortgage that is designed to make it easier for first-time home buyers to qualify for a mortgage. Down payment requirements for an FHA loan are typically lower than for a conventional mortgage, with a minimum of 3.5% of the purchase price. FHA loans also have a monthly mortgage insurance that needs to be considered when comparing loan programs and loan types to best fit your needs
A VA (Department of Veterans Affairs) loan is a mortgage loan that is guaranteed by the VA. It is available to active-duty military personnel, veterans, and certain other individuals. Down payment requirements for a VA loan are generally lower than for other types of mortgages, with some borrowers able to finance 100% of the purchase price. VA Loans have a funding fee, unless you are exempt, which is determined by your lender pulling a Certificate of Eligibility. In most cases, if you have military disability from your time served, you are exempt from the funding fee. If you are not exempt from the funding fee, this fee can be added on to your loan amount.
A USDA (United States Department of Agriculture) loan is a mortgage loan that is backed by the USDA. It is available to borrowers in rural areas who meet certain income and credit requirements (these income limitations vary by county, so make sure you check with your lender on your specific location of the property). Down payment requirements for a USDA loan are typically lower than for other types of mortgages, with some borrowers able to finance 100% of the purchase price.
It is important to note that these are just a few of the many different programs that are available, and requirements may vary depending on the lender and the borrower’s specific circumstances. It is always a good idea to speak with a lender to learn more about the specific down payment requirements for the mortgage program you are considering.