“How Much Will I Need For A Downpayment?”
This is a question I get asked— often. And far too many people are surprised at the answer, as in “What! You mean I have ta’ have a downpayment?” (Sigh) Evidently, there is a whole lotta’ less than accurate information getting shared around the water cooler these days.
Near as I can tell, here’s what’s happening… Seems that a lot of people haven’t been paying attention to the news for the past several years. Some seem to think that nuthins’ changed from the easy money days of the early 2000’s. Back then, all one needed to do to qualify for a zero down mortgage loan was to fog a mirror. Alas, such is not the case today! No sir, we’re in quite a different lending environment. So, without further ado, listen close cuz’ here’s the skinny on what’s available in the current market-
FHA: On most FHA loans, the minimum required cash downpayment is 3.5% of the purchase price. So, on a $100,000 property, a buyer will need a $3500 cash downpayment. From time to time, FHA will run “$100 down” specials. However, these are usually limited to people in certain occupations or properties in certain areas.
VA: This loan program is available only to qualified veterans and certain qualifying spouses. No cash downpayment is required. (If you think you might qualify, but aren’t sure- then give me a call!)
Rural Development: The RD program is administered by the Dept. of Agriculture. While no downpayment is required, only homes in certain rural areas are eligible and there are income limitations too.
Conventional: With the exception of some houses that are in need of repairs (3% down on those) the standard amount required down is 5% of the price. (Note that contrary to the urban legend that no downpayment is required if the property appraises for more than the purchase price, a minimum of 5% is required regardless.)
Contracts & Rent-to-Buys: The percentage down varies greatly on these, and is a matter totally open to negotiation between the buyer and seller. And while I’ve seen as little as $1100 negotiated, more is typical. ($5000 or more makes a BIG difference in being able to buy a good house on good terms.) Plus, keep in mind that the more that’s put down the bigger the selection of homes you’ll have to choose from and the more leverage you’ll have in the negotiations! But, all that having been said, I’ve helped people put together deals for just a grand or two (but it’s quicker and easier with 10 or 20K). It does take a lil’ more creativity to make that work though. The less cash you have the more creative and flexible you will need to be!
Ok, please let me know how I can be of help! Talk with you soon, Bob