The 20% Down Myth
You Don’t Need 20% Down To Buy A Home!
3.5% Down: FHA
580 Minimum Credit Score
An FHA loan is a mortgage issued by an FHA-approved lender and insured by the Federal Housing Administration (FHA). Designed for low-to-moderate income borrowers, FHA loans require a lower minimum down payments and credit scores than many conventional loans.
As of 2019, you can borrow up to 96.5% of the value of a home with an FHA loan (meaning you’ll need to make a down payment of only 3.5%). You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA loan provided you can make a 10% down payment. With FHA loans, your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance.
All these factors make FHA loans popular with first-time homebuyers.
3% Down: Conventional
620 Minimum Credit Score
Conventional loans are growing in popularity thanks to low rates and increasingly flexible guidelines.
A conventional loan is one that is not formally backed by any government entity such as FHA, VA, and USDA. Rather, it is a loan that follows guidelines set by Fannie Mac and Freddie Mae, two agencies that help standardize mortgage lending in the U.S.
Conventional loans are also known as conforming loans because they “conform” to Fannie Mae and Freddie Mac standards.
Does the lack of government backing make conventional loans less desirable? Hardly.
While a conventional mortgage appeals to a wide demographic, it’s especially good for first-time borrowers with decent credit and some amount of down payment.
0% Down: Rural Development
620 Minimum Credit Score
A USDA loan is a mortgage that offers considerable benefits for those wishing to purchase a home in an eligible rural area. USDA home loans are issued through private lenders and are guaranteed by the United States Department of Agriculture (USDA).
The USDA loan’s purpose is to provide affordable homeownership opportunities to low-to-moderate income households to stimulate economic growth in rural and suburban communities throughout the United States.
These rural development loans are available in approximately 97% of the nation’s land mass, which includes over 100 million people.
0% Down: VA Loan
530 Minimum Credit Score
The VA loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).
The VA Home Loan was created in 1944 by the United States government to help returning service members purchase homes without needing a down payment or excellent credit. This historic benefit program has guaranteed more than 24 million VA loans, helping veterans, active duty military members and their families purchase or refinance a home.
Today, the VA Mortgage is more important than ever. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA loan a lifeline for Veterans and active Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.