December 26, 2018
If you make a 20 percent down payment, you save money over the lifetime of your mortgage loan, avoid private mortgage insurance (for conventional mortgages), and reap the benefits of doing these things over the long term.
But millennial home buyers, especially first-time home buyers, may be unable to find the resources to make such a large down payment.
If you make a 20 percent down payment, you save money over the lifetime of your mortgage loan, avoid private mortgage insurance (for conventional mortgages), and reap the benefits of doing these things over the long term. But millennial home buyers, especially first-time home buyers, may be unable to find the resources to make such a large down payment.
You’ll find many internet articles and home finance blogs discussing the idea that the 20 percent down payment on a home being a dead concept; you may also find some of these same blogs and websites pushing USDA and VA mortgage loans as good no-downpayment mortgage alternatives.
The problem with these blogs is that they often fail to discuss in detail the requirements of VA mortgage loans and USDA mortgages. Yes, both of these programs have zero down payment options, but they are highly specialized loans and are not available to all applicants, even those who are financially qualified.
VA mortgages are limited to those who serve a minimum time in the military; USDA loans are income-based and have restrictions on where you can purchase. FHA mortgage loans, by comparison, are not limited to a certain sector of society like VA mortgages are, and are not need-based loans like USDA mortgages. FHA mortgages do not have an income cap.
FHA loans are not limited to first time buyers, those who have a fixed income or receive government benefits, and they are available to any financially qualified applicant.
FHA mortgage loans require only 3.5% down for qualified applicants with FICO scores that meet both FHA and lender guidelines. And FHA mortgages allow down payment assistance from family, friends, and employers.
Your seller can contribute up to six percent of the sales price of the home in seller-paid closing costs, too.
FHA loan limits are higher in 2019, the second year in a row that loan limits for FHA mortgages have increased. If you need a home loan with lower down payment requirements, ask your lender about the FHA home loan option; you may be surprised at what you can do with an FHA mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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