As a first-time homebuyer, you may have heard several misconceptions about how to maneuver through the real estate market – The most common myth being that you must have a 20% down payment to buy a home.
This is false. While it’s great to have a large down payment, it is not a requirement. In fact, first-time homebuyers have the privilege of qualifying for different programs and perks that allow for a low down payment – In this case, as low as 3% down payment.
Conventional loans offer the best financing terms for home buyers. Many First-Time Homebuyers think FHA loans are their best bet, but those who start off with FHA loans usually make it a point to refinance later on to a Conventional loan, due to cheaper mortgage insurance expense. This option is reserved for borrowers with good credit, as well as a few addition stipulations:
- At least one applicant must be a first-time homebuyer (first-time homebuyer is defined as having no ownership interest in a residential property within the last three years)
- Investment properties and/or second homes are not allowed
- Homeownership Education Program is required (can be done online)
- Only for Purchases of a 1 unit primary residence (single family detached, townhomes, and condos are acceptable property types)
- With 3% down payment, the borrower is limited to a maximum loan amount of $647,100
- A 5% down payment option is available for high balance loans (i.e. maximum loan amount of $879,750 in San Diego County)
- Monthly mortgage insurance may be required
With rising interest rates part of our present and future, now is a great time to consider jumping on a first-time buyer program with a low down payment. The decrease in monstrous bidding wars will allow more opportunities for homebuyers to utilize loan programs with low down payments and enter homeownership.
If you have any questions regarding loan options for first-time home purchases, please reach out to us at (760) 930-0569 and one of our loan officers will assist you.
