Many people believe that buying a home is out of reach, as it will take years to save 20% for a down payment. Good news! Your down payment can be less than 20%!
In fact the average down payment for First-time homebuyers in 2017 was 5%, and 10% for repeat buyers, according to the National Association of REALTORS. And, it’s possible to put down even less!
Your down payment can come from sources other than just your personal savings, such as an inheritance or a gift from a family member, stocks or mutual funds, and even a retirement portfolio. The requirements vary based on the loan type. Keep in mind that homebuyers purchasing a primary residence will always have lower down payment requirements than an investor or someone purchasing a second home.
Each loan program also has its own down payment requirements. USDA Loans don’t require a downpayment and neither do VA Loans. Conventional and FHA Loans, on the other hand, do require a down payment.
You’ll need at least 3-5% down payment for a Conventional Loan. The money can come from you or it can be gifted from a relative, employer, or charitable contribution. You must make sure that you follow the documentation guidelines if you do receive the funds as a gift.
You’ll need at least a 3.5% down payment for an FHA Loan. This loan program also allows you to receive gift funds for the down payment. You must make sure that you document the gift properly in order for the lender to accept it. Talk with your lender about their requirements to make sure you follow them closely.
First-time homebuyers have many options at their disposal when buying a home. While Conventional Loans have the reputation of being the ‘best loan’ available, there are other options that you can use. Make sure you explore all of your options to ensure that you choose the loan that is right for you.
What are the General Mortgage Requirements for First-time Homebuyers?
Below we help you understand the basic guidelines so you can prepare yourself financially to help lead you down the right path to Homeownership!
- Return to Buying Your First Home
- Assets & Reserve Requirements
- Credit Score Requirements
- Debt Ratios
- Stable income & Employment
- Down Payment