When looking to purchase a home you will see a lot of articles that focus on interest rate as the only factor in determining how affordable a home is for you. What you’re really looking for is “How much down payment for a house?” A recent Federal Reserve Board study on the factors that impact your home affordability debunks this. (You can read the detailed study of how the down payment for a house affects home affordability here)
The Bottom line of this 52 page report put out by the New York Federal Reserve Board is that housing affordability among people who currently rent improves by a whopping 40% when down payment requirements are reduced. However, a 2% difference in interest rates has only a 5% impact on housing affordability.
This is great news for many home buyers who qualify for some of the low doan payment programs available today in the mortgage market.
Also the recent news on home affordability index is at a new high means that you are in a great market to to purchase now before the summer price increases hit.
To answer some questions here of “How much downpayment for a house?” lets cover some of the programs that are available in today’s market.
Low down payment home loan programs
- 3% home down payment – Conventional Home Loans Offer first time home buyers a down payment of 3%
- 3.5% home down payment – FHA in most cases the down payment is 3.5% – This would be for existing homes and homes that need a little work using FHA’s 203K program
- 5% down Conventional Loans for Previous homeowners – 5% down will get you into a home. Conventional have several advantages over FHA the biggest of which the mortgage insurance will go away when you have enough equity in the home.
- 5% down for a Custom Home Construction loan will get you into a home that is custom built for your family
No downpayment home loan programs
- VA – If you are a Veteran of the Armed Services of the United States you can get a VA home loan with nothing down
- USDA – In certain areas and for those who qualify the USDA home loan offers no down payment home loans
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