News & Press: The Road Home Newsletter

Myths and Truths about Down Payment Requirements

Tuesday, August 14, 2018  
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August 14, 2018

Myths and Truths about Down Payment Requirements

It is a common belief that homeownership requires a 20% down payment.  But the truth is, there are many programs that offer alternatives for lower investments at the time you buy.  For instance, if you are currently enlisted in the military or a veteran of the United States military, you may be eligible for “no down payment” home mortgage financing.  This special benefit honors service to the country and offers the opportunity to achieve homeownership more quickly.  Even if you are not a veteran, Federal Housing Administration (FHA) insured loans are available with down payments as low as 3.5%.  A reminder – there is NO INCOME LIMIT on these FHA loans.  These are not just available to low-to-moderate income consumers. They act as a stimulus to Homeownership for those needing low down payments to enter the homeownership market.  These mortgage loans require payment of FHA mortgage insurance premiums to protect lenders in the event of a default – and will be included in your monthly mortgage payment. Those premiums last the entire life of the FHA loan.  And there are many programs for conventional loans through thousands of Lenders in America. Frequently those loans are sold to Fannie Mae or Freddie Mac as the ultimate owner of the loan.  Conventional mortgage loans offer down payment options as low as 3.0%.  For these conventional loans, the interest rate may be somewhat higher than if you have 20% down payment. In addition, with less than 20% down payment, private mortgage insurance premiums are required (which will make the monthly payment higher, but in many cases still less expensive than FHA mortgages especially because Private Mortgage Insurance is eventually cancellable, where FHA Insurance is not.)  However, if you have 5, 10 or 15% to put down, your interest rate may be lower and the private mortgage insurance payments will be lower, too. Many people choose a lower down payment program because it may allow them to retain a “cushion” in their savings account or if funds will be needed for property upgrades or furnishings.

 

At Your AHA our mission is to protect and promote sustainable homeownership for allsegments of America.  We know that many Americans have become successful homeowners with less than 20% down payments and have used homeownership to build their personal family wealth.  To help you assess your options, please check out our Achieve the Dream tool on the AHA website.  This interactive tool will show you options and how the options will affect monthly payment amounts, available here.

End of Summer – Time to Party

As summer draws to a close, plan a party to celebrate the end of summer and get everyone in a positive mood to head back to school and ready for Fall.  Here a few tips to make all of your planning and preparations easier.

  • 16 Tips for an Effortless Summer Party, realsimple.com.  Article here.
  • 5 Backyard End of Summer Party Ideas for Kids, prettymyparty.com.  Article here.
  • Summer Party Menus, foodnetwork.com.  Article here.

Back-to-School Bargains Still Available

If you are getting your student(s) ready to return to school, don’t miss the special discounts and cash back awards available for all of your needs – especially televisions, computers and travel services!  Just go to AHA Member Rewards to see the latest offers.

 

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