It's possible to buy a home with a down payment of as little as 3%, and you can even buy a home with no down payment if you qualify for a VA or USDA loan. If you have a down payment of less than 20%, you may have to buy private mortgage insurance, pay a higher interest rate, or face more competition in the housing market. Unlike a standard conventional loan, Fannie Mae's HomePath loans don't require mortgage insurance or an appraisal. Some of the properties may need to be repaired, but they offer a great opportunity, especially for first-time homebuyers who have little to pay for a home.
This is a common question among homebuyers and mortgage buyers. The short answer is yes, a well-qualified borrower can certainly get a mortgage loan with a 5% down payment. That's enough to satisfy most mortgage lenders these days. While market forces can influence the overall range of mortgage rates, your specific mortgage rate will depend on your location, credit report and credit rating.
You can use Bankrate's mortgage calculator to get an idea of how different down payment amounts affect your monthly mortgage payment and the interest you can save by investing more money. A 15-year mortgage gives homeowners 15 years to pay their mortgage in equal fixed amounts plus interest. This program requires an initial premium of 1.75 percent (which can be added to the amount of the mortgage) and an annual mortgage premium (0.85 percent for most loans). Conventional loans are mortgages approved following the guidelines established by mortgage giants Fannie Mae and Freddie Mac.
Private mortgage insurance, or PMI, is also not a requirement to make a low down payment on a mortgage through this particular lender. While guidelines for non-compliant lenders may be everywhere, most noncompliant loans with down payments of less than 20 percent include mortgage insurance, and mortgage insurance requirements are fairly uniform. However, once you accept your mortgage agreement, a fixed-rate APR will ensure that your interest rate and monthly payment remain constant throughout the term of the loan, unless you decide to refinance your mortgage at a later date to obtain a potentially lower APR. Keep in mind that if you decide to make a down payment of less than 20%, you'll be subject to private mortgage insurance, or PMI, payments in addition to monthly mortgage payments.
If you're not interested in a USDA loan, this particular lender also offers conventional loans, FHA loans, VA loans, giant loans and a community loan from PNC Bank, a special program that allows homebuyers to deposit as little as 3% (without having to pay private mortgage insurance) and choose between fixed-rate and adjustable-rate mortgage terms. An FHA loan has a monthly mortgage insurance requirement, like a conventional loan, but it also has an “initial” mortgage insurance (MIP) premium. Ideally, you should deposit everything you can comfortably afford to pay to increase your chances of approval, possibly avoid mortgage insurance and have a more affordable monthly mortgage payment.