Downpayment Required For Home Loans

How much downpayment is required for a home loan?

1 Answer

The famous answer: "it depends."

There are numerous programs that allow for 100% financing, meaning no down payment is required, while other programs require over a 20% down payment. So it depends on what kind of home loan you are looking for and it depends on your level of qualifications in terms of credit, income, and assets.

For the average person with decent credit who can prove their income, has several months worth of mortgage payments in reserve in the bank, and is buying an OWNER-OCCUPIED property, 100% programs are actually fairly easy to obtain.

Other factors must be considered though. In general, interest rates and mortgage insurance rates move higher as you approach 100% financing. So if you have money for a down payment available, you may find it in your best interest to use some of it to lower your payment and interest rate. Furthermore, in this current market, a 100% loan might not make sense if you are not planning on being the home for long as you might find yourself with negative equity (you owe more than the home is worth).

The question of how much to put down is often one of necessity. Many people that want to buy homes cannot afford any down payment. Lenders have done a good job of adjusting their guidelines to make sure that other factors compensate for the lack of down payment before they will give you a loan. Still it is a good idea to consult with a mortgage broker and learn about the future implications of the loan you are getting into.