Types of loans 

Home buyers today can choose among dozens of loan types, but more than 90 percent of buyers (including first time home buyers) will end up using one of four popular loan programs. These are: the conventional home loan, FHA home loan, VA home loan, and the USDA home loan.

Do I have to pay the down payment out of pocket? 

Most mortgage programs require a down payment. Theoretically, this is money you put toward the home purchase out of your own pocket. Below are the most common types of loans and what each require: 

  • FHA, 3.5%
  • VA, 0%
  • USDA, 0%
  • Conventional, 3%  

There are ways to avoid the down payment and still be able to secure a loan. One way is to find a down payment assistance program in your area. Down payment assistance programs, usually run by local governments, offer up grants or ultra-low interest loans to help first time home buyers make their required down payments. You can also use gift funds for a down payment on a mortgage. To use a cash gift for down payment, however, you’ll have to prove that they come from an “acceptable source.” That means providing a paper trail showing the gift funds leaving the giver’s account and being deposited into your account or into escrow. 

Why do people say that you need 20% down?

Average down payments are well under 20 percent. You might wonder why so many people think 20 percent down is the minimum. It’s because 20 percent down gets you out of paying for something called “mortgage insurance.” Mortgage insurance is an extra charge on your monthly mortgage bill and sometimes can be expensive. Understandably, most buyers would rather avoid paying for mortgage insurance if possible. That’s why some people aim for a down payment of 20%.

How do I know if  I’m ready to buy a house?

If you want to know whether you’re ready to buy a house, ask yourself these three questions:

1. Do I have a steady job and reliable income? 
2. Do I have enough money saved for a down payment and 
    closing cost? 

3. What is my credit score? 

There is much more to each of these questions, but these answers will give you a good starting point in determining if you are prepared to begin the home buying process.

The next step

Are you ready to take the next step? I would love the opportunity to sit down and answer any questions you may have. Give me a call today, I look forward to speaking with you.   

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.