Are you considering low down payment options? Omni Lending LLC offers tailored solutions to help you achieve homeownership without breaking the bank. Let us guide you through the process.
Low Down Payment Options
FHA Loan
An FHA loan allows you to purchase a single-family home or condominium with as little as a 3.5% down payment, but there is a price for lower down payments on conforming loans: mortgage insurance (often called PMI, private mortgage insurance).
Mortgage insurance is required when the conforming loan amount is more than 80% of the purchase price (practical translation: the down payment is less than 20%). The lower the down payment, the higher the premium ratio charged.
USDA Loan
Do pasture and farmland surround your dream home? Buyers in rural and suburban markets may be able to use a USDA loan, which requires no money down.
Household income limitations apply, and buyers should expect to pay PMI if their down payment is less than 20%.
VA Loan
Military veterans 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.
Non-conforming mortgage loan programs are available that allow for 80/20 set-ups, which allow borrowers to obtain a second mortgage to cover the 20% down payment.
Have less than perfect income and credit? We may have a program that fits your needs!
How much should I use for a down payment?
Any option, including those with low down payments, has costs and benefits. You should carefully consider your options and discuss your plan with a professional.
Talk to one of our loan specialists today to create a customized solution that best suits 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 a 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. Your rate of return decreases as you make a larger down payment, as discussed below.
- Opportunity cost. The intelligent investor can sometimes 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, at the end of the year, you get quite a bit of your monthly payments back 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 differ from the level you feel comfortable paying each month. It would be best if you decided what you can afford.
Talk to your loan officer at Omni Lending LLC about the best situation for you.
