Our Okemos agent Christina Rademacher breaks down down payments for first time home buyers and sellers!
“When a buyer is purchasing a home, he/she will most likely use financing to make the home purchase. As a result, a down payment will be necessary to complete the purchase. The amount of the down payment will depend on the type of financing he/she is using. For example, a conventional loan typically requires 5% or more down, while an FHA loan requires a down payment of 3.5% down. There are other loan options but conventional and FHA are the most commonly used.”
According to Lending Tree, a conventional loan is a mortgage that is not guaranteed or insured by any government agency, whereas FHA loans are insured by the Federal Housing Administration.
Bankrate.com says conventional loans are more ideal for buyers with good or excellent credit because they are pretty conservative when it comes to borrower credit scores, minimum down payments, and debt-to-income ratios. These loans can have more third-party fees but may have fewer obstacles than FHA loans.
On the other hand, Bankrate says that FHA loans can benefit people who plan on using a good portion of their take-home pay on their house payments. These loans do have mortgage insurance premiums, but may be the only option for those with low credit scores.