• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

A Reverse Virginia Mortgage Lender! Nationwide Reverse Mortgage

  • Home
  • Refinance
    • Get Cash From Your Home
    • Lower Your Payment
    • Reverse Mortgage Loans
    • Consolidate Your Debt
    • HARP Refinance Program
    • Pay off Your Mortgage Early
  • Buying A Home
    • First Time Home Buyer
    • Making Sure You Are Prequalified
    • Vacation Homes
    • Low Down Payment Options
    • Reverse Mortgage for Purchase
    • USDA Home Loans – Rural housing loans
    • Purchase Application Checklist
    • Purchase Loan Process
  • Apply Online
  • Loan Options
    • 30 Year Fixed Rate Mortgage
    • 15 Year Fixed Rate Mortgage
    • FHA Home Loans
    • Reverse Mortgage Loans
    • Home Loans for Veterans! VA Loans
    • Jumbo Home Loans
    • Stated Income Loans
    • No Cost Loans!
    • New Construction Loans in Virginia
  • About Us
    • Blog
    • Client Testimonials
  • Contact Us
Home » Buying A Home » Low Down Payment Options

Low Down Payment Options

Low Down Payment Options in Virginia

In purchasing a home, which is better, to make a larger or smaller down payment? For some home buyers, this decision is very confusing and hard. However, the answer would be, “it depends.”

low down payment optionsIn all seriousness, the best route for each buyer or investor really does depend on their situation and personal preferences. The summary below reviews four issues that all home buyers and investors should consider about down payment:

  • Down payment options
  • Cost of lower down payments
  • Benefits of lower down payments
  • Personal considerations

The information provided below is for the purpose of provoking thought and careful consideration about different financing programs available. It is not meant to steer you toward one particular program. It is merely an exposition of the options to consider when purchasing a home or investment property.

Low Down Payment Options

You can purchase a single-family home or condominium with as little as 3.5% down payments. But there is a price for lower down payments on conforming loans: mortgage insurance (often called PMI, private mortgage insurance).

Mortgage insurance is required when the conforming loan amount is MORE than 80% of the purchase price (practical translation: down payment less than 20%). Also, the lower the down payment, the higher the premium ratio charged.

The bottom line is that regardless of your credit and income situation, you actually have different options to purchase a home with no money down.

Get pre-approved for a First time home buyer loan today!

Cost of Lower Down Payment

Low or no down payment programs have two primary costs:

  • Higher interest rates
  • Higher mortgage insurance premiums.

The downside of giving a small down payment, whether you are using a conforming loan or a non-conforming program, is that you will need to pay for higher interest rates and mortgage insurance.

Mortgage insurance is calculated against the loan amount, so you get hit with a double-whammy. Lower down payment means a higher loan amount and a higher mortgage insurance rate.

Mortgage insurance can be removed once sufficient equity is produced. So if the property shows at least 20% equity in a few years, the mortgage insurance can be refinanced away.

A related burden of lower down payments is obviously higher loan amounts, which translates into higher monthly payments.

Consider, for example, the purchase of a $100,000 condominium with market interest rates of 6.500%.

  • With a 5% down payment, the loan of $95,000 would have monthly payments of $600.46.
  • However, a 10% down payment would decrease the loan amount to $90,000 and the payment to only $568.86 per month.

During the first few years of the mortgage loan, the bulk of your monthly payments are for interest—which is normally tax-deductible. So you actually get a bit of your monthly payments back at the end of the year in the form of tax deductions.

Benefits of Lower Down Payments

However, though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.

The chief benefits of lower down payment include the following:

  • Increased liquidity. Instead of tying up your cash in hard assets, you can maintain your asset liquidity.
  • Higher rate of return. You property’s appreciation will be the same whether you put 3%, 5% or 20% down payment. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.
  • Better investment possibilities elsewhere. In some cases, the smart investor can make more money from available cash by placing it in other investments.

Personal Consideration

Whether to give a low down payment or not, it should be carefully thought of. You must consult professional advice for this, but remember that one case may differ to yours, since you have other priorities and obligation. For many consumers, the thought of any debt—let alone a huge mortgage—can be rather frightening. The tendency is to lower personal debt levels as much and as soon as possible.

You must make your own personal calculation, of the monthly payment that you can afford. Obviously, the lender will qualify you for a certain level, based on your income. But that qualification level is often different from the level that you feel you can best pay.

Your mortgage lender may have qualified your income for a monthly mortgage payment of $1,200; however, you may feel that you can realistically afford only $1,000 per month. If that is the case, you must lower the loan amount by increasing the down payment or finding a less expensive property.

Consult with your loan officer about the best situation for you, as well as ways to eliminate or minimize mortgage insurance.

Working with Fairfax Mortgage Investment

  • We put YOU first.  We are committed to getting every client the best possible deal every single time
  • FMI offers some of the most competitive rates in VIRGINIA!
  • Fast and efficient, we close most of our loans in 30 days or less
  • We offer a variety of loans.  We work with both conventional and non-conventional loans to get you the mortgage that meets your unique needs.

Primary Sidebar

Search

Mortgage Rate Alerts & Market Updates

Sign up to receive mortgage rate alerts and market updates delivered to your inbox!

Recent Posts

  • Kiplinger: Live Well in Retirement with the help of a Reverse Mortgage
  • A Reverse Mortgage can be a Retirees Saving Grace
  • Mortgage Rates At The Lowest Levels Seen In A Month
  • How to Submit a Down Payment Gift Letter that Won’t Get Turned Down by the Lender
  • Homebuilders Planning For Biggest New Home Sales Surge Since 2007

Fairfax Mortgage Investment – FMI

Looking for a low rate home loan? You will find low rate loans at Fairfax Mortgage Investment. We designed this mortgage site to give you all the information you need to assist you in obtaining financing for your home.

FMI is one of the largest mortgage brokers in Virginia. We offer low rate home loans for home purchase, refinance, and Reverse Mortgages throughout all of Virginia.

Footer

Fairfax Mortgage Investment

Looking for a low rate home loan? What about a Reverse Mortgage? You will find low rate home loans at FMI. We designed this mortgage site to give you all the information you need to assist you in obtaining financing for your new home or reverse mortgage.

FMI is one of the largest mortgage brokers in Virginia. We offer low rate home loans for Home Purchase, Refinance, Reverse Mortgages and Debt Consolidation throughout all of Virginia.

Recent Posts

  • Kiplinger: Live Well in Retirement with the help of a Reverse Mortgage
  • A Reverse Mortgage can be a Retirees Saving Grace
  • Mortgage Rates At The Lowest Levels Seen In A Month
  • How to Submit a Down Payment Gift Letter that Won’t Get Turned Down by the Lender
  • Homebuilders Planning For Biggest New Home Sales Surge Since 2007
  • Mortgage Rates Today : Real-Time MBS Pricing, April 18, 2013

Regions

  • Northern Virginia
  • Arlington
  • Fairfax
  • Manassas
  • Alexandria
  • Fredericksburg
  • Tidewater
  • Virginia Beach
  • Newport News
  • Chesapeake
  • Williamsburg
  • Richmond
  • Roanoke
  • Charlottesville

Copyright © 2021 · | Corporate: 3900 University Dr #300, Fairfax, VA 22030 | (804) 282-8820
Reverse Mortgage Calculator
| Financial Advisor Richmond | XML-SiteMap | Privacy Policy | SiteMap
Mortgage Calculators

Fairfax Mortgage NMLS ID# 117990 (www.nmlsconsumeraccess.org) · Log in