What is a down payment and how much will it cost?


What down payment is required on a house? (By type of loan)

Each type of loan has its own down payment requirements. These can also vary depending on the lender. Your down payment also plays a role in other costs, such as mortgage insurance. Here’s how a down payment works with some popular loan options available.

Type of loan

Minimum deposit required

Conventional loans

3%

FHA loans

3.5%

Jumbo Loans

Varied

VA loans

0%

USDA loans

0%

Conventional loans

Conventional mortgages, like 30-year and 15-year fixed loans, have guidelines set by government-backed housing finance companies Fannie Mae and Freddie Mac. These loans generally have more stringent eligibility requirements than government guaranteed loans like FHA loans. A first-time home buyer may qualify for as little as 3% down payment from some lenders.

FHA loans

FHA loans are government guaranteed loans with relatively flexible guidelines set by the Federal Housing Administration. You can get an FHA loan with a down payment as low as 3.5%.

If you’re buying a home with an FHA loan and your down payment is more than 10%, you’ll need to pay monthly mortgage insurance for the first 11 years. If your down payment is less than 10%, you will continue to pay the PIM until you refinance to another type of loan or pay off the loan.

Jumbo Loans

Jumbo loans are mortgages where the amount exceeds the loan limit, which varies depending on the location and type of property. In most of the United States, the loan limit for a single-family home is $ 548,250 for 2021.

Since these loans are for such large amounts, they require a larger down payment – usually at least 10.01% of the purchase price. But the minimum down payment depends on the credit rating, occupancy, and the amount of the loan.

VA loans

VA loans, backed by the US Department of Veterans Affairs, help veterans and their spouses buy a home. A VA loan does not require a down payment, which makes it a great option if you are eligible.

Unlike a conventional or FHA loan, a VA loan does not require mortgage insurance with a smaller down payment. Instead, you will pay a finance charge to help support the loan program. VA financing fees are generally lower than mortgage insurance, and you may be able to waive the fee if you receive a VA disability or are a surviving spouse. If you are an active duty Purple Heart recipient, you are also exempt from fundraising fees.

USDA loans

USDA loans, backed by the United States Department of Agriculture, are available for homes in rural areas. USDA loans do not require a down payment, which makes them a great choice if you meet USDA loan income requirements and are considering a home in an eligible area.

When you get a USDA loan, you will also pay an upfront guarantee fee and an annual guarantee fee. These fees help support the loan program and are generally lower than the mortgage insurance you would pay with a conventional or FHA loan. We do not currently offer USDA loans.

About Matthew R. Dailey

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