Getting pre-qualified before touring homes can be a great way to ensure that you can act fast in today’s real estate market. When you’re on the prowl for that perfect property and are ready to pounce, the last thing you need is a pre-qualification delaying your offer.
One of the questions your mortgage professional with inevitably ask is, “How much do you want to put down?” Your down payment can be a gateway into a variety of useful mortgage programs suited for a wide range of needs.
It’s important to note that mortgage program guidelines are always in a state of flux, so be sure to contact one of our real estate professionals to make sure you’re prepared with the latest information.
Mortgage Programs
There are three main mortgage programs you for which may qualify, based on your down payment amount and credit scores:
- FHA (Federal Housing Administration)
- Conventional
- VA (Veteran’s Administration)
Down payment requirements for each program were consistently updated in relation to current market conditions. In most cases, the more you put down on your new home, the more incentives the loan program provides.
Since most consumers are primarily concerned with interest rates (and rightly so), remember that the minimum down payment may not always get the best interest rate, while a higher down payment will expand your loan program opportunities.
Mortgage Insurance
If a lender is at a higher risk of loss when a buyer may default on a loan program, the lender will usually require you to pay for an insurance policy on their behalf called mortgage insurance (MI).
Traditionally, this is required on a loan with a down payment less than 20% of your new home’s purchase price. VA loans, however, are exempt from paying MI.
Down Payment Tiers
There are three main down payment levels that will progress you through the various loan programs for a traditional single-family home.
- No-Money Down (currently limited to VA loans only)
- 3.5% down (FHA)
- 5% down (Conventional
VA loans are limited to those currently enlisted in the military and veterans. While there is no down payment requirement on VA loans, a funding fee will be required by law. This fee can be reduced with a down payment of at least 5% down and also be financed with your loan if needed.
FHA financing will require a minimum of 3.5% down and an up-front mortgage insurance premium (UFMIP) to be paid. This fee is also constantly revised through mortgagee letters issued by HUD, so be sure to check with your mortgage professional for the latest UFMIP amounts.
Conventional loans require a minimum of 5% down and have the largest variety of loan programs available. A conventional loan is a traditional loan by a bank with competitive interest rates based on your credit scores.
Talk to your Real Estate and Mortgage Professional
As you can see, obtaining financing can be a difficult process if tackling it alone. Luckily, our real estate agents have dedicated themselves to understanding this process completely and have teamed up with mortgage professionals who share the same passion.
Contact a gayrealestate.com agent today to get started.
Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com offering Free Instant Access to Gay, Lesbian and Gay Friendly Realtors Coast to Coast.
