Profile picture for rebgebs

As a first time home buyer, what is the smallest down payment I can get away with?

As a first time home buyer, what is the smallest down payment I can get away with? And will it significantly affect our interest rate even though we have excellent credit? (760+)
  • February 08 2012 - Folsom
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Answers (18)

The first time home buyers program varyfrom state to state. Get with your local lender to know for sure. They are in the business of lending money to buy homes. They know better than anyone what you can expect. It's free to you and they are there to assist in the process. You can start at your bank. My buyers have always started there to secure their loans and they have been able to get the best advise from the experts in the lending field. Thanks
  • February 19 2012
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Profile picture for gmlending
If you do FHA financing then your down payment is 3.5%; but that can be lowered if you combine the FHA with the down payment assistant programs or grant, which are available for first time home buyers with low income.
Then the down would only have to be about 1%, of the purchase price.
  • February 19 2012
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Rebgebs - how much do you have, or how much can you come up with (with gifted funds) for your home purchase?

Though a down payment most likely represents the bulk of the funds you'll need to secure your home, it's not the whole enchilada...

I just closed a deal where my borrower paid a 1.5% negotiator fee (for negotiating the short sale with BofA), this was a $3200 additional expense...fortunately he and his home qualified for a 100% financed USDA loan, so he didn't have to come in with much more than this amount!

As others eluded to, their are a few programs with low, or no down payments, and there's the possibilty of getting some form of down payment assistance (DPA), but all DPAs come with a down side (which I can review with you if we speak)...

Let me know if I can help!

Best, Jeff Marr
  • February 19 2012
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For buyers in Chicago, and really, all of Illinois, they should look into the IHDA loans which offer a 3% down payment grant for first time homebuyers. Income limits are generous, a few classes are needed, and if you go with a HOMEPATH loan or FHA you will need very little down.

  • February 14 2012
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Contact local mortgage home consultants and they will help you to see what you qualify with no obligations
  • February 14 2012
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Sometimes small credit unions have programs with extremely low down payments that don't require the 3.5% FHA downpayment. These types of programs are really hard to find, and I've never worked with any client that used one.  

Homepath Homes (Fannie Mae) are properties that can qualify for a 3% down payment.

Around 2007-2009 Bank of America offered some programs that were 1st time buyer grants of a couple thousand (a grant is essentially a gift you didn't have to repay).  They are not offered by BoA currently.  If you have more time than money you can scour your resources for programs like that one.

Also there are programs like USAA Mover's Advantage which offer a buyer a rebate which is taken out of their realtor's commission. There are downsides to using some of these programs (You get the discount if you use their selected vendors and agents only. The quality of these people varies).  You still have to have the 3.5% down, but if you properly negotiate an offer with the seller paying closing costs the rebate can make the purchase more managable.
OR
Find an agent and broker who is able to rebate some of the commission.  The key is "rebate" and not "credit towards closing costs".  You'll want someone who is building a relationship with you for your future business and referrals, not some jerkoff that will ignore you.  Depending on your purchase price you might be able to get about 1% from the agent. Ask for it up front and be polite and respectful of the agent's time for best results. Some firms charge transaction fees, ask for these to be waived if you get a rebate of less than 1%.

If you want something in a rural area, check out USDA loans. You can't get this in most urban and suburban areas.

Bottom line, do your homework and keep looking for the right people to help you. You look young, getting the right place now will pay off for you later. If you really want to make it work you'll figure out a way to make it happen even if it includes a ramen and no cable kind of budget at first.

  • February 14 2012
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I'm with Dan on this one-
If you don't have the funds for a down payment then how are you going to deal with the unexpected stuff home ownership (let alone life in general) throws at you? 

Sunnyview provides a comparison chart for conventional vs FHA although I was hoping that we would hear more specifics from the lenders that hang around here.  You could end up paying significantly for paying less down, not only because of differences in interest rates but because pmi is required, as stated below, for less than 20% down.
  • February 09 2012
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Hi Rebgebs,

If you qualify for one of the local or state 1st Time Homebuyer Programs, yyou can purchase a home with 0 Down Payment. These programs are based on income, etc. but are really wonderful for 1st time Buyers.  Contact a local lender or Realtor in your area and ask if they can provide you with info on Downpayment Assistance Programs for 1st Time Buyers!

And yes, your credit will help you immensely! =)

Hope this helps!

Stacey Hammer
Broker-Associate
Melbourne Realty, Inc.
Melbourne, FL
  • February 09 2012
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It depends on the loan program and the property you choose. If you locate a property that is a Fannie Mae HomePath property you are required to only put down 3%, if it is Standard FHA 3.5% Down or if it's HUD Owned Property $100.00 down but there are also state funded programs where you can be nothing down. Just be certain to consult with your lender regarding the available options in your area. Your Realtor also will typically be aware of the eligible property types and available programs. 

Best of Luck
Robert B. Summers
Indianapolis, IN
  • February 09 2012
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Profile picture for Karen Borden
Hello!  There are many programs that offer you options, such as FHA which is 3 1/2% minimum (you will have mortgage insurance included in your monthly payment).  There are several options with Conventional with 5% usually being the minimum down.  However, there are programs with certain financial institutions that offer Conventional with Lender Paid Mortgage Insurance (LPMI) which means you can put down 5% and not have to pay the monthly PMI (which is required unless there is a 20% down payment - or special programs).  These interest rates are usually a bit higher, but many times, it's still a lesser monthly payment than paying the PMI.  Locally, in the Huntsville, AL area, there is a private lender that offers 100% financing with no down payment and no PMI!!!  But - it is income related.  And, Alabama does have the Rural Development Loan; this is also 100% financing, no down payment and no PMI - but it does have a funding fee and, again, income related.  Definitely contact some lenders to get even more information!
  • February 09 2012
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There are programs that in fact offer you little or no down payment but it would depend on many variables. Being a first time buyer there in fact are programs that assist buyers with great credit to get in a home for very little. I would talk to your lender or your Realtor for guidance. In the state of Virginia our housing/development departments offer no down programs but you can't make over a certain amount of money. Of course, great credit will always open doors to better options for you. Good Luck and Happy Home Buying!!
  • February 08 2012
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Shannon Rose I gave you a thumbs up. I think you have the best answer here. I was going to say the same thing so instead I will just support your answer.

I would also like to add, you will need 2 years of everything to qualify as well. Tax returns, same line of work, etc

Hope this helps.
  • February 08 2012
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Profile picture for Shannon Rose
The lowest down payment right now is a FHA loan at 3.5%, unless you are affiliated with the VA, in which  you can qualify for 0% down. I would suggest reaching out to your realtor, or lender about down payment assistance programs located in your city/county. In Santa Clara County, and San Jose City there are down payment assistance programs offered to residents purchasing in this area, that meet certain qualifications. These programs are typically based on income qualifications, or specific to certain professions. (Law Enforcement, Educators, etc)
  • February 08 2012
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Profile picture for Matt Hiatt
FHA is a 3.5% down loan. There is also a Homepath Mortgage that is available on some Fannie Mae homes at 3% with no appraisal cost. If it is in an outlying area, I believe that the USDA loan is available with no down.
  • February 08 2012
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Profile picture for the_country_hick
You may be able to get a V.A. (veteran only) for 0% down. The last I knew USDA (rural only) was at the same rate.

The real question is if you have nothing to put down how will you handle any unexpected expenses that could arrive? Owning means if the $4,000 furnace dies and can not be repaired you have to somehow come up with that money to stay warm.
  • February 08 2012
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Profile picture for sunnyview
FHA is your best bet if you need a smaller down payment. there is a comparison of FHA vs Conventional rates here that might help explain the differences.
  • February 08 2012
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That's correct. the lowest down payment right now is 3.5% FHA. It used to be 3% but has been raised. WE hear rumors this could go away at any time and change to 5% , but not yet. It is still a great time to buy. I can feel us reaching the bottom of the market.
  • February 08 2012
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Profile picture for wetdawgs
FHA loans require a 3.5% down payment.   
  • February 08 2012
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