First Time Homebuyer FAQ: Down payment
For those of you who prefer to read! This is a transcript of this YouTube Video by the same title.
Today we are going to be talking about frequently asked questions by first time home buyers, specifically as it pertains to down payment.
How much down payment do I need to buy a home?
That can be a complicated question to answer because it all depends on your situation
Technically speaking, it is possible to purchase a home with zero down. How?
One way would be using a VA loan. If you are eligible for a VA loan, you can purchase with no money down as long as you are not borrowing more than your county limits.
If you are not eligible for a VA loan, another way to get 100% financing in San Diego County is to use USDA financing. USDA financing does have income limits and just as importantly, it has restrictions on the location. The home has to be in an area that USDA considers to be a rural area. To find out if the area that you’re interested in is eligible for 100% USDA financing click this link and it will take you to a map of eligible areas.
The next category would be conventional financing.
It is now possible to purchase a home using conventional financing with as little as 3% down as long as you are purchasing it as a primary, it’s a unit property AND you are a first time homebuyer.
If you are not a first time home buyer, however, then 5% is the minimum requirement on conventional loans.
If for some reason you can’t qualify by for conventional financing (lower credit scores, higher debt to income ratios, etc.) then FHA would be your next best option. The minimum down payment on FHA is 3.5%. You don’t have to be a first time home buyer to purchase using FHA financing and you can purchase a multi-unit properties with 3.5% down.
So there you have it, a little rundown on a minimum down payment requirements.
Next…..
Where can my down payment come from?
Your hard earned cash in your savings, checking, investment accounts and even your retirement account are acceptable sources of down payment.
If you have generous relative who would like to help you out, gifts are also a possibility for your part or all of the cash to close depending on the type of transaction that you are entering into.
If you are buying a one unit property then all of the down payment can be from a gift for conventional, FHA, VA and USDA. There is no minimum requirement.
One exception if you are purchasing a home as an investment using conventional financing gifts are not allowed. All of the cash to close will l need come from your own funds
Documenting and paper trail in funds to close is very important part of the process. Please check these links and take a look at the blog and the video that I put together regarding acceptable sources of fund so that you don’t find yourself in a sticky situation later.
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Give me a call or send me an email if you have any questions..…..until next time!