I had lunch today with a past client which is always enjoyable, and sometimes is very informative to me. My friend asked me if it was true that you had to put twenty percent down to buy a house these days. With all the turmoil in the finance world, the economy, and various markets it was a very good question. I knew one didn’t need 20% down, but I thought I would make a few calls. Here is what I learned and want to share with you.
It’s true, zero down loans are gone. No ‘doc’ or no documentation loans are gone and most would agree they should be, and should have never been available in the first place. This being said, as of today a buyer can get an FHA loan for as little as 2.25% down. Closing costs up to 6% can still be seller financed so one can buy a home today with just 2.25% down!! This rate is going away however. Starting January 1st a buyer will need 3.5% to qualify for an FHA loan.
On the conventional mortgage side, 5% is required today to get a 30 year conventional loan. There are still options of financing such as doing an 80% first, 15% second and 5% down so as to eliminate mortgage insurance.
The most popular lending question is what are rates. I hesitate to give any numbers as they are fluctuating so wildly along with the rest of the economic markets. That said, rates on the 30 year FHA and conventional loans both are hanging right between 6% and 6.5%.
This made me all wonder why then is the perception out there that you need 20% down? One of my very good lenders with over 10 years of experience said that he had just had a client that had tried to get a loan with a large well known bank, and they were requiring the 20% down. Moral of the story is to talk to more than lending source, and make sure they are experience, creative and yet have a good name behind them so that they will still be in business on your closing date.
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