Why Down Payments Aren’t as Bad as You Think!

Down Payment Blog

Traditionally down payments fall between 10 and 20 percent, but Factors such as credit score, loan program and income can impact the down payment amount that is required. Today, borrowers have many options for not only how much their down payment will be, but also where they source the funds.

Loan Programs

The most common loan programs are FHA, VA, and USDA. The FHA is know for down payments as low as 3.5 percent and has recently offered a new program called HomeReady that features down payments as low as 3 percent. Both VA and USDA loans offer programs with no down payment.

Some states also offer their own programs to give down payment assistance. For example, in Michigan MSHDA is where consumers would go to find information on these programs. Lenders need to apply to be eligible for these programs so check with your lender to see if this is a program that they participate in.

Some private lenders also offer their own programs. The best way to find out about lender loan programs is to get in touch with a mortgage broker like Mortgage Explorers. Due to the variation in private lender programs, we work with clients on an individual level to find the best program for them.

Additional Fund Sources

The first option is gift funds. They do require additional paperwork but are a great option for borrowers who need additional cash to close. Traditionally, gift funds are only allowed from family members, but exceptions may be granted. Gift donors must provide bank statements and a letter of explanation so that the lender can verify the source of the funds. Gift funds are very common for first time buyers or borrowers who have family members that want to help them get their dream home.

Another common option is using retirement funds for all or part of the down payment. How and when you can use your retirement accounts depends largely on what kind of account it is and what type of plan you are on. Many accounts have penalties associated with removing money from your account, so make sure you understand all the risks before removing money.


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