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As a top mortgage company, we at Mortgage Investors Group know that for many clients, the down payment can be easily the largest source of stress when it comes to your next mortgage. This lump sum, generally represented as a portion of the final principal loan amount, is put down up front as part of the home purchase.
What are the typical down payment requirements on standard loans, and what are some of the programs that might allow you various workarounds? Let’s take a look.
Typical 30-Year Requirements
For a 30-year loan term, the most popular type out there, down payment requirements will vary between loan types. For a conventional loan, the industry standard is generally 20 percent of the principal loan amount.
However, there are various situations that might allow you to pay far less than this. The Federal Housing Administration offers a loan program where down payments are just 3.5 percent, plus funds can be provided in a gift if possible. The VA loan program, meant for veterans and their families, requires no down payment at all as the home is 100 percent financed by the government. Even many conventional loans can get as low as 3 percent down payments.
Jumbo Loans
A jumbo loan, which exceeds certain maximum loan thresholds, is a bigger risk to your lender. As such, they generally come with higher down payment requirements – often even above 20 percent in some cases. This will depend on the lender, however, and you may have to shop around a bit. Private mortgage insurance, which is often used in the place of a higher down payment amount, is often not available for jumbo loans, which is a big part of the reason why their down payments may be higher.
Why Under 20% Options?
If a 20 percent down payment were required for all homes and mortgages, the mortgage industry would suffer badly. In reality, most borrowers simply can’t afford 20 percent down up front – the average down payment is far less than this. Programs that offer lower numbers are necessary to keep the entire industry functioning.
For more on down payments, or to learn about any of our mortgage lender services, speak to the pros at Mortgage Investors Group today.
