My husband and I are looking to purchase a home before our first child is born this summer. However, we don’t have a lot of savings for a down payment. How much do we actually need for a down payment? So far, we only have about $4,000 saved.
There are three basic types of loans commonly used today, and all three have options for a down payment of 5% or less. I’ll give you a quick summary that I think will answer your question.
FHA – You can purchase a home with FHA financing if you have at least 3.5% for a down payment and anything better than terrible credit. There is also an option to use CHFA down payment assistance in Colorado which allows you to purchase a home for as little $1,000 down. An additional benefit to FHA financing is that gift funds are allowable for the down payment.
VA – If you have ever served in the United States military you may be eligible for a VA loan. (Basic eligibility info is available here.) VA loans allow for no down payment at all. In most cases, if you are eligible for a VA loan it will be your best option unless you have 20% down and good credit at which point you’ll want to consider conventional financing.
Conventional – If you can come up with at least a 5% down payment and have very good credit, you’ll want to consider conventional financing. Keep in mind that you’ll have mortgage insurance unless you have a 20% down payment, but it is typically preferable to FHA if you qualify.
Of course, there are nuances to everyone’s specific situation that need to be accounted for when deciding on financing. It should also go without saying that the greater your down payment, the less risk you’re taking on. The above information is simply a summary of what is available, and shouldn’t be construed as my endorsement of particular options.
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