Low Down Payment Options

FHA Loan

You can purchase a single-family home or condominium with as little as 3.5% down payment using an FHA loan, but there is a price for lower down payments on conforming loans: Mortgage Insurance Premium (MIP). Most of the time, the FHA mortgage payment and the MIP combined is still less than a Conventional loan.

Private Mortgage Insurance (PMI) is collected on Conventional loans when the conforming loan amount is MORE than 80% of the purchase price (practical translation: down payment is less than 20%). Also, the lower the down payment, the higher the premium ratio charged.

USDA Loan

Is your dream home surrounded by pasture and farmland? Buyers in rural and suburban markets may be able to use a USDA loan, which requires no money down.

Household income limitations do apply and buyers should expect to pay PMI if their down payment is less than 20%.

VA Loan

Military veterans and their spouses who qualify for a VA loan can purchase a home with no money down. VA loans can provide up to 100% financing for qualified military personnel and veterans.

Have less than perfect income and credit? We go all the way down to 500!

No down payment loans

We offer a couple no down payment programs that can be used for down payment and closing costs. Some are repayable and some are forgiven. Talk to one of our loan specialists today to come up with a customized solution that best fits your needs and budget.

Cost of a Lower Down Payment

Low or no down payment programs have two primary costs that result in a higher monthly payment:

• Higher interest rates

• Higher mortgage insurance premiums.

Mortgage insurance can be removed once sufficient equity is produced. For example, if the property shows at least 20% equity in a few years, the mortgage insurance can be refinanced away.

Benefits of Lower Down Payments

Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.

The chief benefits of lower down payment include the following:

• Less money out of pocket at the time of purchase.

• Higher rate of return. Your property’s appreciation will be the same whether you put 3%, 5%, or 20% down. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.

• Opportunity cost. In some cases, the smart investor can make more money from available cash by placing it in other investments.

During the first few years of the mortgage loan, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.

Personal Consideration

Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.

Talk to your loan officer at Old West Lending, LLC about the best situation for you.