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Don't Empty Your Bank Account To Buy A Home (12 Minimum Down Payments For Different Loans) - YouTube
Channel: Win The House You Love
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i still keep hearing people say that you
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need 20 down to buy a home and you
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absolutely do not the minimum down
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payment is actually a lot less than 20
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and in this video i'm going to cover 12
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minimum down payments on different types
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of loans because saving for a down
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payment is tough especially as home
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prices continue to increase i keep
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hearing stories about people saving for
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years only for the price of a home to
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continue to go up and up and up
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sometimes over a hundred thousand
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dollars in value and last year
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appreciation for home growth was around
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17 so that means if you wanted to buy
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last year this time last year the medium
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home price was around 337 000
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and in the period of a year the median
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home price skyrocketed up to 405 000
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that means for a minimum down payment on
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a conventional loan you need an
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additional two thousand dollars more in
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down payment or in other words you need
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to save 168 dollars a month on top of
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your current savings for a down payment
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and closing costs just to keep up with
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home appreciation so i'm gonna walk you
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through 12 minimum down payments so you
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can better understand different loans
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and then decide what you want to do to
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buy a home so the first tier is
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conventional loans conventional loans
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are usually best for people who have
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lower debt compared to the income that
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they have and usually have a higher end
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credit score so 680 and higher is
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usually best however the minimum can go
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down to 620.
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so
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the first one here is three percent so
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this is usually reserved for first-time
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buyers and a first-time buyer is someone
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who has not been on the title to home in
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the past three years now first-time
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buyers and conventional loans have two
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programs underneath them called home
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ready and home possible and you can use
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these if you're not a first time home
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buyer if you're under an income limit in
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your area so you can talk to a loan
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officer a little bit more if you qualify
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for those but three percent down is the
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minimum that you need as a first-time
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homebuyer on a conventional loan far
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less than the 20 that most people talk
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about the second is five percent down so
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if you've already owned a home then
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you're likely going to have five percent
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as a minimum down payment on a
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conventional loan you get disqualified
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from the first time home buyer label and
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can't use the three percent down now if
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you are a first time buyer you might
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consider looking at both a three percent
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uh down payment and a five percent down
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payment and get quotes from loan
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officers on both
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because often you can get a lower
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interest rate on five percent down than
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you can on three percent that's why it's
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good to compare
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and then finally 20 down why does
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everyone talk about 20 down well 20 down
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used to be what was very common as a
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minimum years ago it's not really a
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thing anymore what 20 down does now is
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it eliminates the need for mortgage
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insurance pmi private mortgage insurance
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so basically
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if you have a down payment less than 20
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percent
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the lender is going to charge you a
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monthly fee called private mortgage
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insurance which basically protects the
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lender in the case that you default on a
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loan it's really not that expensive it's
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usually probably going to be in between
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uh 60 to 120 dollars per month depending
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on your loan size compared to the rest
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of the payment it is not terrible
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especially for the ability to not have
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to put 20
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down now i do have the full loan
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requirements for conventional loans in
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the description if you are interested in
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learning more about that then we move on
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to fha fha is great for people who have
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a lot of debt compared to their income
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this would be what would be called a
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debt to income ratio a high debt income
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ratio fha is great for that also great
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for if you have some credit challenges
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so fha actually changes the down payment
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depending on what your credit score is
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so there's two different uh segments
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here
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if you have a 580 credit score and
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higher
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the minimum down payment is 3.5 just a
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half percent higher than conventional if
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you have anywhere between a 500 to a 579
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credit score then the minimum down
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payment is 10
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fha does require mortgage insurance for
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both of these types
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if you have 10 down mortgage insurance
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does fall off after 11 years on an fha
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loan
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and i also do have full loan
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requirements in the video description
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for this loan type as well
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va va is a fantastic option for veterans
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and works well with all different types
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of credit scores so you do have to have
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a certificate of eligibility to be able
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to qualify
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for a va loan but the minimum down
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payment on va is zero percent there's no
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down payment required no monthly
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mortgage insurance required however
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there is what is called a funding fee
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think of it like mortgage insurance
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paid up front and it's usually
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wrapped in included inside of the loan
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amount and i do have a full loan
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requirements video in the description as
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well
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another one usda zero percent down usda
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is for what is called a rural area and
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more areas than you might think actually
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qualify for this for a lot of people if
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they extend their commute by around 15
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to 20 minutes usually they can be inside
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of a usda area that's considered rural
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and you can do zero percent down usda
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tends to like 640 credit scores and
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higher however there are lenders who
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will go down to a 500 credit score on
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usda and again i do have the full loan
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requirements for this type of loan in
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the in the description and then we get
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to jumbo
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so all these loans that we just talked
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about conventional fha va and usda all
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have loan limits except for va and the
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loan limit is just basically a maximum
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loan that the lender will give you so if
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you go above that
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limit then you need to get into what
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would be called a jumbo loan and jumbo
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loans are a little bit different because
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there's not as
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standard guidelines or standard roles as
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there are for these other types of loans
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and so the down payment minimum can
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really vary a lot between different
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lenders so you want to talk with
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different ones to see but there are a
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lot of lenders who do five percent down
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as a minimum and there are a lot of
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lenders who do 10 down as a minimum
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these tend to be the most common for
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jumbo loans however again there's not
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strict guidelines that all lenders
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follow on jumbo loans it's all going to
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be dependent on the specific lender that
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you're working with so if you want to
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find minimums for jumbo if you're
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looking at a loan size that is a lot
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higher
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than what you can get with conventional
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fha
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or usda then you want to shop with
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lenders to find that minimum down
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payment the next is portfolio loans a
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lot of people aren't familiar with
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portfolio loans
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kind of in the same way that jumbo loans
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don't have a certain standard
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portfolio loans are the same
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in that they don't have one strict
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standard it varies lender to lender and
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portfolio just means
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that it's a special type of program that
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usually is for a specific
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group of people so for instance a lot of
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portfolio loans are what are called bank
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statement loans where they actually use
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bank statement deposits and an average
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of those to qualify you for
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a certain income rather than things like
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pay stubs um or w2s or tax returns or
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something like that that's usually for
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self-employed people who write off a lot
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on their taxes another option is what's
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called a dscr loan a debt service
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coverage ratio loan which basically is
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for investment properties where instead
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of underwriting income or asking for
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somebody's
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w-2s tax returns pay stubs things like
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that they'll actually look at how much
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income does the property create compared
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to how much is the monthly payment so
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those are portfolio loans usually for a
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special case scenario and again these
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are very lender to lender but usually
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you're going to run into 10 down as a
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minimum on certain programs for really
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well qualified people higher credit
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scores low debt to income ratios
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or 20
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when you're getting into more of the
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investment type loans
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and then finally is down payment
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assistance and we're also going to
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increa include uh any sort of like
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grants in there which we would classify
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as down payment assistance
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and
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unfortunately the answer is there is not
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one set there's all kinds of down
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payment assistance programs throughout
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the us the best way to figure these out
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is to search for your local housing
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authority either in your county or state
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and they should direct you to different
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programs and different down payment
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assistance programs will either offer a
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certain dollar amount of assistance
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towards down payment
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and or closing costs or a percentage of
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the purchase price towards the down
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payment or closing costs just know that
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when you do run into down payment
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assistance programs you might run into
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some where you don't have to pay
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anything but more than often
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you will still likely need to bring some
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money to the closing table maybe just
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not the full down payment so for
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instance i've seen it be very common
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where the down payment assistance
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program might offer two percent
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uh in down payment assistance and so on
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an fha loan if the three and a half
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percent is the total you need to bring
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1.5
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as the down payment but all programs are
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different so then this brings the
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question we know the minimum down
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payment but how does the minimum down
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payment actually impact how much house
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you can qualify for because the larger
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your down payment is the higher purchase
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price you can actually qualify for so
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this is how we can explore that a little
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bit okay so let's run through a quick
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example using this max purchase price
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calculator there's a link to this in the
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description if you want to try it
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yourself so let's say we're using a
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minimum down payment on conventional
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loans as a first time buyer three
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percent down and let's say we make sixty
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thousand dollars per year and maybe we
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just have a credit card with a minimum
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monthly payment of 150 a month just for
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an example and let's say it's just uh
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maybe it's us and then maybe we have
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somebody
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on the loan with us and make thirty
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thousand dollars here
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so if we jump over to our dashboard we
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could see what the estimated maximum
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purchase price would be
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343 349 based on what lenders would use
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to help you look at its income ratios
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and this calculator explores that a
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little bit more so 343 is kind of our
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baseline right now well what happens
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then if we change this to
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let's say five percent down
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all of a sudden that bumps it up to 348
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okay nothing crazy but then let's take a
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look at what if we went to 15 down
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378 358 so we can see how that down
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payment the more that we put down
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actually starts to increase our maximum
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purchase price so that might be
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something to consider however you might
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be on the other end of saying actually
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we just want to be able to get into a
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home so that we can catch up with
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appreciation or that we don't have to
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keep adding more and more monthly
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savings to be able to catch up to the
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larger down payment needed
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if homes continue to appreciate at the
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same level so now it's frustrating to
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see home values continuing to appreciate
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and using like i have the savings i'm
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trying to save as quickly as i can but
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it's difficult to keep up really the
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best thing to do is start exploring what
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loan programs might work best for you
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again in the description i have links to
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different loan requirements to help you
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figure out which one is going to be best
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for you start to see what the minimum
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down payment is and explore if that's an
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option that you want to take maybe the
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minimum works for you or maybe you want
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to save more and you're actually
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comfortable with your ability to save to
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catch up with home values appreciating
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and also at the same time we don't know
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what appreciation will look like next
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year we don't know what home values will
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do and so really it's going to be up to
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your risk level what you're comfortable
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with but the best way to figure this out
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is to first understand all the options
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that are before you and then make a
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decision
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