Do You Need 20% Down to Buy a Home?
Updated: 4 days ago
Resource-information notice: This article summarizes general, publicly available information about mortgage programs. It is not legal, tax, financial or lending advice. Mortgage requirements and availability can change.
Many people believe they must put 20% down to purchase a home. Although a 20% down payment can have benefits, it is not required for every mortgage program.
Why Is 20% Commonly Mentioned?
With many conventional mortgages, putting at least 20% down generally means the borrower will not be required to pay private mortgage insurance, commonly called PMI.
A larger down payment also reduces the amount being borrowed. However, the amount required depends on the borrower, lender, property and loan program.
Programs That May Allow Less Than 20% Down
Subject to eligibility and lender requirements, publicly available program information includes:
Conventional loans: Certain Fannie Mae and Freddie Mac programs may offer down-payment options as low as 3%.
FHA loans: Some qualified borrowers may be eligible for an FHA-insured loan with a down payment as low as 3.5%. FHA mortgage insurance generally applies.
VA loans: Eligible veterans, service members and certain surviving spouses may qualify for a VA backed loan without a down payment. Funding fees and other requirements may apply.
USDA loans: Eligible borrowers purchasing qualifying properties in approved areas may qualify for 100% financing. Income, property and program requirements apply.
These are general program minimums not guaranteed terms or approval for an individual buyer.
A Down Payment Is Not the Only Expense
Even when a loan requires a small or zero down payment, buyers may still need funds for other expenses. These can include closing costs, prepaid taxes and insurance, inspections, an appraisal, moving expenses and repairs.
A smaller down payment may also result in mortgage insurance, program fees or a larger amount being financed.
Who Determines Eligibility?
A licensed mortgage lender evaluates a borrower's financial information and determines which loan programs may be available. Factors can include income, credit history, monthly debts, available funds, the property and current underwriting requirements.
A real estate agent does not determine mortgage eligibility or guarantee financing approval.
The Main Point
A 20% down payment is not required for every home loan. Some qualified borrowers may have lower-down-payment or zero-down-payment options.
Before relying on any program information, speak directly with a licensed mortgage lender about current requirements, costs and eligibility.
Ghenesis Cordero, REALTOR® Vero Realty
Disclaimer: This material is provided only as a general educational resource. It is not legal, tax, financial, credit or lending advice and does not guarantee eligibility, loan terms or approval. Consult a licensed mortgage lender regarding financing and qualified legal, tax or financial professionals regarding those subjects.
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