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Truth Teller: 20% down payment needed is old news in the home buying industry -- 3% is your new lucky number.

Posted by Lisa Reyna on Thursday, January 3rd, 2019 at 5:54am.

Whether or not purchasing a home in 2019 is on your list of aspirations, this article may shed a ray of light on your resolutions.Although you are not wrong for assuming the widely circulated piece of information stating you need a 20% down payment in order to purchase a home -- it's most certainly not true, and as a matter of fact, the majority of first time home buyers put down far less than that (and as little as 3%). Thanks to the American values of achieving the dreams of home ownership, over the years there has been a variety of loan programs put in place which have made it possible for home buyers to achieve their goals.

FHA Loans: Short for 'Federal Housing Administration' is a program created to make 'inclusive communities and quality affordable homes to all' -- and yes, that means the plethora of home buyers that don't have 80k laying around for a down payment on a modestly priced home in Denver. With an FHA loan, a buyer is able to put as little as 3.5% down while also capitalizing on FHA's other signature advantages including qualifying with a less than optimal credit score (580+) and having a debt to income ratio up to 55% (the cut off for conventional loans is 45%).
*The downfall of an FHA loans is mortgage insurance (or MI), which lasts for the life of the loan and comes in two phases. 1. A price paid at closing (usually about 1% of the loan amount) and 2. Monthly payments which are tacked on to the mortgage amount for the 'insurance' portion (which can add on up to a few hundred extra dollars). Although these extra costs are not small amounts, the FHA loan program a golden entrance ticket for those with low credit scores and/or high debt ratios.

Conventional Loans: The news gets a little sweeter with these loans as this specific loan program is available to both first time and repeat home buyers and offers as little as 3% down as long as you have an above average credit score (620+). Other benefits of this conventional loan program include are 1. that the mortgage insurance drops off after you reach 20% in equity and 2. it does not entail additional closing fees upon purchase. This loan program is an automatic go to for those with good credit and have a debt to income ratio 45% or below

VA Loans: For my military people out there - these loans are gold as they combine the benefits of  0%  down payment, no mortgage insurance, and reduced closing costs. Let me know if this you and I would be happy to introduce you to a qualified VA lender.

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