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Typical down payment On a House | FHA Mortgage - YouTube
Channel: Schultz Home Sales by Aleksandra
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Hi I'm Aleksandra Schultz with Schultz
Home Sales, Keller Williams North Shore
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West serving the Antioch, Illinois and
surrounding area and I have today with
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me a guest Sly Marinca from Finance of
America Mortgage who's going to talk
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about the question that I hear very
often and there's a lot of confusion
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going on around it. How much should you put
down, the percentage, and also what your
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credit score should be? So there's a lot
of questions that he's going to answer
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for us today.
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So what is a down payment and then what
does your credit score need to be in
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order to qualify? Sure, so the down
payment is the money that you have to
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come up with out of pocket to purchase a
home, and minimum credit score right now
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for an FHA loan is 580, and for a
conventional loan is 620. Okay great, what
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I noticed we were talking about earlier
you said if your credit score is low
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there are options that you could do in
order to bring it up so you can qualify
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for a loan.
Correct, we we work with a great company
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that provides credit reports for us and
they have some additional tools that we
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can use to kind of guide people along on
what they need to do to improve their
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credit scores. Whether it's paying down
revolving debt, paying off collections,
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there's just a whole bunch of tools that
we have at our disposal that we can kind
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of guide people along on how to get
their credit scores where they need to
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be so they could purchase a home.
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Oh okay
that sounds great
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so if you have any more questions
regarding that please feel free to reach
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out to him, and then he'll let you know all
the resources available for you to be
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able to bring up your credit score to
purchase a home. What is the typical down
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payment on a house that you see. So
typically we're used to seeing between 3
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and 5 percent down for a down payment,
again those are on the lower end but
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that's usually what we're seeing so
between 3 and 5%. Okay, okay and I know a
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lot of people think that it's 20% and
this is where I get questions all the
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time about oh but I thought it was 20%.
So what is the benefit of putting down
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the 20%? So when you get to 20% down you
avoid paying private mortgage insurance
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also known as PMI. PMI is something that
if you're not putting the 20% down it's
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an extra monthly charge that gets added
on to your mortgage payment. So, if you
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can get to the 20% or more threshold, you
will avoid paying that additional
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insurance policy. And do you know
approximately what the
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cost is of PMI if somebody wanted to put
down less than 20%? Sure, so it varies
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depending on how close to 20 percent you
get. For FHA for instance its point eight
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five percent annually is the factor that's
used to calculate FHA, of the
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loan amount, correct. So it's .8% so on a
hundred thousand dollar loan that'd be
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$850 per year divided by twelve that's
about $70 a month. So it
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is significant,
so getting to twenty percent is ideal
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but you know you don't have to. We have
the programs with with a minimal
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downpayment. So yeah, twenty percent
down is where you avoid paying that
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extra mortgage insurance. Okay, that's good to know.
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So is a FHA a good option?
Absolutely, FHA is a great program that
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allows minimum three and a half percent
down payment and goes down to a 580
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credit score, so it helps us get people
approved that might not qualify for a
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conventional loan. Also the waiting
period on an FHA loan for from a
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bankruptcy or a foreclosure or a short
sale is a lot less than it is for a
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conventional loan. So if something
happened in the last five, seven years
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you know where you had a foreclosure or
you had a bankruptcy, you might not
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qualify for conventional, but FHA's a
little more lenient on that so
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definitely a great loan program. We do a
ton of FHA for first-time homebuyers you
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know and again you don't have to have
the best credit score to qualify for an
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FHA loan. Well you were also just telling
me that there is actually an option to
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put down 3% with a conventional loan, and
not an FHA loan, so what is the
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difference between the three and a half
of FHA a 3% conventional? Yes, there
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are conventional also offers a three
percent down loan for first-time
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homebuyers. Whether it's the Freddie Mac
home possible program or the Fannie Mae
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home ready program that they do also
offer those to first-time homebuyers
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provided you meet their income limits
for the area that you're purchasing in.
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So definitely 3% down conventional can
possibly be of an option for first-time
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homebuyers. Okay great and then so with
the FHA three and a half down you said
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that there was a PMI is it something
that's also factored in the 3% down
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because you're not putting down 20%? Yes,
there is, there is PMI also on the
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conventional 3% down program the
difference between the two is on an FHA
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loan
besides the monthly mortgage insurance
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premium, FHA also requires you to finance
1.75 percent of the loan amount into the
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loan as upfront mortgage insurance.
So they're kind of doing a
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double mortgage insurance, where part of
its financed into your loan, and then
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you're also paying monthly for
next however many years. Whereas on a
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conventional loan that upfront mortgage
insurance premium is not part of the
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deal,
it's just a monthly mortgage insurance
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premium. So when we get someone we take a
look cuz a lot of it has to do with
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credit score, FHA again goes down to 580
and they don't have the same risk-based
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price adjustments as a conventional loan
does. So we really do a very detailed
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analysis on each borrower and really
look at what their credit score is,
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exactly how much they have to put down,
how much they want to put down, and we
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determine which of those options works
best for them. Okay, that's really good to
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know. So, you would be saving 1.8
percent of your whole mortgage loan if
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you went 3% conventional versus FHA. Yeah,
it's 1.75 percent that is is taken off,
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that you don't pay as part of the
upfront mortgage insurance premium
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that's financed into your loan on the
conventional three percent down if you
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qualify for that and you're under the income
limit for the county or purchasing in
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you don't pay that upfront mortgage
insurance. So that's really great. So
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thank you so much for answering all
those questions, that was super helpful.
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And for anybody looking to get more
questions answered or for financing
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options, please make sure to contact Sly
Marinca from Finance of America Mortgage
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and I'll have his contact information
down below. And please remember to
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subscribe to my channel I'll be posting
every Thursday. Thank you, thank you.
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resource SS of it what do you see the
average down payment on a home for
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first-time homebuyers sure so you know
again first-time homebuyers is typically
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between three and five percent
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