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What is the Minimum Down Payment I Need?

Minimum Down Payment

The biggest hurdle for most first time homebuyers is coming up with the down payment.

Minimizing your down payment is most often the goal of first time buyers.

My experience is that there is a lot of confusion about what the minimum down payment is for each loan program.

My goal here is to create a single resource to help you to compare all of your down payment options.

The easiest way to explore these limits is to sort by loan type.

VA Guarantee – No Down Payment

VA loans allow 100% financing up to the conforming loan limit.

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For purchases prices above the conforming loan limit, the Veteran is only required to pay 25% of the difference above this conforming loan limit, and your purchase price.

In high cost counties, coming in with the 25% difference is significantly less than any Jumbo loan down payment requirement.

If you are eligible for a VA guaranteed loan, there is no better option for buying a home.

Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 100% LTV – Zero Down Payment
Rental Property N/A N/A

USDA Guaranteed – No Down Payment

USDA is another 100% financing loan for families buying in USDA eligible areas.

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USDA guaranteed loans do not have loan limits like typical loan programs.  Instead, USDA uses income limits and three different income calculations to determine your maximum purchase price.

You can research income, and property eligibility with the USDA Lookup Tool.

Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 100% LTV – Zero Down Payment
Rental Property N/A N/A

Conventional – Fannie & Freddie 3% Down

Most people do not know that Conventional financing downpayment requirements start at only 3% of the purchase price.

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  • If you’re using a Fannie Mae loan, this program is called HomeReady.
  • If you’re using a Freddie Mac loan, this program is called HomePossible.

Important features to these programs include discounted mortgage insurance, and a cap on loan level price adjustments (LLPA).  A cap on LLPAs will keep closing costs and interest rates under control.

Both of these special programs have different qualifying guidelines and income limits to use the 3% down payment option.

Make sure you discuss both of these options with your loan officer if you are interested in going this direction.

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Occupancy Transaction Type Maximum Loan to Value
Owner Occupied Purchase 97% LTV – 3% Down Payment
Rental Property N/A N/A

Conventional – Fannie & Freddie 5% Down

I am surprised at how many visitors to this site believe that conventional home loans require 20% down payment.

If you can meet the 3% down payment guidelines, that’s great!  If you cannot meet location or income requirements, conventional financing only requires a 5% down payment up to high cost County loan limits.

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Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 95% LTV – 5% Down Payment
Rental Property Purchase 85% LTV – 15% Down Payment

FHA Insured – 3.5% Down Payment

FHA insured loans are an amazing opportunity for anyone purchasing an owner occupied home that requires more flexible qualifying, and a lower down payment.

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The most important restriction you need to know about FHA insured loans is that it can only be used to purchase a home that you will live in as your primary residence.

Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 100% LTV – Zero Down Payment
Rental Property N/A N/A

First/Second Piggyback – 89.99% CLTV

A first and second piggyback loan is becoming a more popular option as home values rise around the Country.

The most common reason why a piggyback loan is used is to avoid mortgage insurance, or Jumbo financing.

The maximum first mortgage would normally be either the maximum conforming loan limit, or 80% loan to value, whichever is greatest.

Piggyback second loans are most commonly used with a Conventional first mortgage.

Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 80% LTV 1st TD / up to 9.99% HELOC – 89.99% CLTV
Rental Property N/A N/A

Jumbo Financing – 20% Down Payment

As a general rule, Jumbo financing will require 20% down payment or more, depending on your credit scores, and the amount you are trying to borrow.  These numbers represent a loan amount up to a million dollars, with a minimum 720 FICO.

NOTE:

Occupancy Transaction Type Max Loan to Value / Min Down
Owner Occupied Purchase 80% Loan to Value / 20% Min Down
Rental Property Purchase 60% Loan to Value / 40% Min Down

Portfolio Loans – Buy sooner after hardship

Portfolio loans bridge the gap between your preparedness to buy a home, and the waiting period requirements after a significant financial hardship like bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure.

These loans tend to be 5 to 7 year ARM loans, fixed for 5 or 7 years, and adjustable after the fixed period.

The ideal use of one of these programs is when you are eligible for a traditional, more stable loan within 3 to 5 years max.

For portfolio loans, the time from the financial hardship directly affects the minimum down payment.  See below:

Occupancy Hardship Event Max Loan to Value / Min Down
Owner Occupied Less than 12 months (1 day ok) 80% Loan to Value / 20% Min Down
Owner Occupied Greater than 12 less than 24 months 85% Loan to Value / 15% Min Down
Owner Occupied Greater than 24 months 90% Loan to Value / 10% Min Down

Need a Second Opinion?

You can catch me most days taking questions through live chat on the lower right corner of this article, or answering questions from other articles on this site.

Please feel free to ask any questions below, on chat, or email.  This is an opportunity for you to anonymously ask an experienced professional that has absolutely no financial interest in how they answer your questions.

About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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