Many first-time home buyers believe you need to have a 20 percent down payment. However, the good news is, there are many low-down-payment mortgage options available.
As a first-time homebuyer, it’s possible to get a conventional mortgage with a down payment as low as 3%. In fact, the average down payment for a first-time homebuyer is only 5%. This means that on a $300,000 home loan, you would be putting down $15,000.
Conventional loans provide the lowest interest rate available for borrowers with a good credit score. Keep in mind that putting down less than 20 percent, means the borrower is required to get private mortgage insurance (PMI), but that can be removed when they reach 20 percent equity.
The biggest downside to conventional loans for first-time homebuyers is the credit required. A conventional loan is best for borrowers who have a strong credit score. If their credit isn’t great, they may be better off with an FHA loan.
FHA loans are insured by the Federal Housing Administration. These types of loans are very popular with first-time homebuyers because the requirements are not as strict as conventional mortgages.
If a first-time home buyer’s credit score is between 500 and 579, they will have to make a 10 percent down payment. However, if it is 580 or higher, they can make a down payment of as little as 3.5 percent of the purchase price. There are many FHA loan options available, the best one all depends on the borrower’s individual circumstances.
Keep in mind that the terms on FHA loans tend to not be as great as they are on a conventional mortgage loan. So, if you qualify for a conventional mortgage it would likely make more sense to go with that option.
Buying your first home can be overwhelming, but taking the time to weigh all the options will be worth it in the end. If you need help navigating which decision is best for your particular situation, contact our team at Georgia Platinum Mortgage!