How Much Down Payment You Really Need To Come Up With In Order To Buy A Home

So, you’re thinking about buying a home, but you’re not sure how much you’ll need to save up?

Maybe you’re here because you’ve heard the common misconception that you need 20% down in order to buy a home. Thankfully, that is a complete myth. While coming in with 20% does provide an added benefit, there are PLENTY of options to come in with a down payment well under 20%. In fact, the median down payment for first time home buyers in 2018 was just 7%, according to Nerd Wallet. 

Maybe you’re reading this and you just said to yourself, “Well, I don’t have 7% either… so there goes that.” Fear not, as there are many loan programs available as low as 0%! In order to dissect all your options, let’s jump into the 4 most common financing options… Conventional, FHA, USDA, and VA… 

Conventional Financing

You’ve likely heard the term “conventional home loan” many times before. Rightfully so, as it is the most widely used financing option. With a conventional home loan, you can come in with as little as 3-5% down. In order to qualify for a conventional home loan, traditionally you need a minimum 620 credit score. Amid coronavirus, some lenders are increasing their credit score minimum, so you'll need to check with a specific lender to see what they require.

A conventional loan can be great for those with good credit, as individuals with lower credit may get a better interest rate going the FHA loan route as described below. Another large benefit to a conventional loan is the ability to use it for non-owner occupied homes. 

FHA Financing

The next most popular type of financing is an FHA loan. This is used very widely with many first time buyers (although it is not exclusive to first time buyers). With an FHA loan, you can come in with as little as 3.5% down! Another added benefit to an FHA loan is the minimum credit score requirement, which is only a 580 score. Just like conventional financing, many lenders have also upped this credit score requirement due to coronavirus, so check with your specific lender.

Unlike a conventional loan, this type of financing can only be used for a personal residence, so it won’t be an option for anyone looking to buy a rental property. 

$0 Down With Down Payment Assistance 

An added benefit to going FHA, is the ability to use down payment assistance. Through Washington State Housing & Finance Commission,you could qualify to receive up to 4% towards your down payment. Therefore, if you qualify for the 3.5% down program, as well as this down payment assistance program, you could then come in with $0 Down. This down payment assistance comes in the form of a silent second mortgage. 

In order to qualify for the down payment assistance, you must have a minimum 620 credit score and must make LESS than $145,000 per year. 

USDA Financing

While USDA loan programs are less common than the 2 above, they can be a FANTASTIC loan option for those looking to buy a home in a rural area. If you’re shopping for a home along the I5 or I405 corridors, this won’t be an option for you. If you’re looking more on the eastside, specifically east of highway 9, you may qualify. Check out the eligibility map here. 

With a USDA loan, you can also come in with $0 Down! The USDA itself doesn’t set a minimum credit score requirement, however most lenders will require minimum credit scores between 620-640. 

VA Financing

Lastly, we have VA financing. Of course, this is only an option for Veterans. However, if you are a Veteran, this is a great opportunity. With a VA loan, you can also come in with $0 Down!

The VA also doesn’t set a credit score minimum, but most lenders will likely require a minimum 620 credit score. However, I have seen individuals qualify with a lower credit score, so don’t hesitate checking into it. 

As you can see, there are MANY different options when it comes to down payments when buying a home. We have helped many homebuyers who thought they wouldn’t be able to qualify for a home, purchase a home much much sooner than they had thought they could.