Hey, it’s Dan Lesniak here with a new “Ask the Real Estate Agent” segment.
In today’s episode I will be talking about down payments, the different types and their requirements.
Generally it depends on your situation, but it’s important to know you definitely do not need 20% down payment. I know a lot of people think that it stems from how it was decades ago, but nowadays there are programs ranging anywhere from 0% up to 20% and above.
Here are some examples of types of down payments:
- 0%
- >5%
- Conventional program, where you can get in for as low as 3%.
- 3.5% down payment via FHA.
- 5% to 15%
- Taking out 2 loans – primary loan taken out at 80% with standard interest, and then second loan taken at a higher interest rate to cover the remaining gap between your down payment and the 20%
- Key benefit for this is if you’re expecting a large sum of money from the sale of stock/gift/commission, you can quickly pay off that second loan with the higher interest rate.
- Mortgage insurance:
- Paid monthly – you have one loan for 85% (up to 95%), and can pay a higher monthly payment because you have mortgage insurance
- Lender paid mortgage insurance, where the lender pays it upfront for you and you get a slightly higher interest rate.
- Taking out 2 loans – primary loan taken out at 80% with standard interest, and then second loan taken at a higher interest rate to cover the remaining gap between your down payment and the 20%
These are just a few of the different types of loan programs out there. Once you can get to 20% you’re gonna have more options, bigger loan amounts, and better interest rates. The higher the down payment the greater optionality.
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