If you are under the assumption that all loans are the same when it comes to guidelines, FICO credit scores, and Down Payment Guidelines you are sadly mistaken. There are plenty of loan programs out there and no two programs are created equal, especially when it comes to Down Payment Guidelines. Yes, for most loan programs you are going to need down payment funds of some kind, but how much you will need is determined in the qualification process for some loans as seen with FHA Loans. In this article we will go through the different loan programs and the applicable Down Payment Guidelines you will have to follow in order to get your approval.
It seems only fitting that the first loan program we look into is the most popular loan, and that is FHA Loans. Now FHA Loans actually has 2 different options available for down payment and it is clearly listed out in the Down Payment Guidelines and is also found in the FHA 4000.1 Handbook. For FHA Loans, your down payment requirement is contingent on the strength of your FICO credit score. There are 2 tiers available and they are:
As you can see here, with the higher FICO credit score (580+) you are able to obtain a mortgage with just a 3.5% down payment so on a $200,000 home, you will only need $7,000. If you have a lower FICO credit score and are in the lower tier you will need 10% down payment and possibly other compensating factors that can strengthen your financial profile before obtaining a loan approval. If you are in the market for an FHA Loan, Down Payment Guidelines are a necessity when you start the approval process.
This is where it gets interesting when looking at Down Payment Guidelines in the sense that there isn’t a formal down payment requirement on VA Loans and it is basically up to the lender in order to determine the guidelines they want to enforce. For VA Loans, it is entirely possible for borrowers who qualify to get a loan with 100% financing as long as their loan amount is within their entitlement which is normally $424,100. Lenders are well within their rights to enforce Lender Overlays which are additional requirements on top of minimum guidelines and you could see lenders wanting 5% down payments when there truly isn’t Down Payment Guidelines. Mortgage Scenarios only work with lenders who lend to the minimum guidelines and without overlays so when you work with us, you will get some of the best product offerings around.
Conventional Loans which are also known as being Fannie Mae or Freddie Mac have a few different options in their Down Payment Guidelines. If you are a first-time home buyer there is a loan option available to you where you can get a home with as little as 3% down payment. However, if you aren’t a first-time home buyer you will need to adhere to a 5% down payment requirement.
Here at Mortgage Scenarios we are experts dealing with Down Payment Guidelines and we have the confidence to suggest the proper loan and down payment given your background. We can weigh the options with you on different loan programs and the subsequent down payment needed. If you want to ensure you are in the proper loan, you need to reach out to us immediately.