Conventional, FHA, VA, USDA: low down payment options, mortgage insurance, gifts, closing cost assistance, and more
“20 percent.” If you have researched the home loan process, you have likely heard the number 20% and the term “down payment” used in the same sentence.
Conventional wisdom (for the conventional loan program) says that a 20% down payment is required to close on a home loan. For a $400,000 home, the 20% down payment would require $80,000 in cash. This is a large chunk of change, an amount of cash that some buyers are unable – or unwilling – to access.
In reality, the 20% number is simply a guideline. Given the right conditions and the right loan, borrowers can pay as little as 0% down to close on a loan.
In this article, we will go over the low- and no-down payment options for borrowers in San Luis Obispo County, the Central Coast, and California.
The Conventional Loan
- Minimum Down Payment: 5%
- Mortgage Insurance: Yes; for loans made over 80% loan-to-value (Read More)
- More Information: (Read More)
Lenders are in the risk minimization game. The safer the borrower, the better terms the lender offers (read: a lower interest rate).
The 20% down payment means that the lender’s total investment covers 80% of the purchase price. For the hypothetical $400,000 home, this “loan-to-value” (LTV) of 80% requires a $320,000 investment from the lender, and an $80,000 down payment for the borrower…