Buying a home anyplace is a challenge for most people and sorting out the myths from reality as to what is required can be a challenge.
One of the questions I hear most often is, “How much do I have to put down?” The answer is, “It depends.” The type of property, your financial situation, your intention for occupying the property, your credit and income all are factors particularly if you don’t want or have 20 percent to put down.
The least you can put down is zero if you and the property meet certain requirements. These include your income being below $91,000 for a family of two, you don’t own any property at the time of closing of the purchase, good credit and the property (in Eagle County at least) is not a condo. Townhomes, duplexes and single-family homes will work though. This program is a USDA loan. There are a lot of ins and outs, and these loans are not easy to get approved for but they can work wonders for some people. Generally these loans are limited to the mid-$300,000 range because of the income caps.
Another loan program that goes to 100 percent LTV is the VA loan for eligible veterans. These loans can be a great deal for eligible vets and are certainly a perk they have earned serving our country. Again though, there are currently no eligible condos in Eagle County, but townhomes and duplexes are eligible as well as single-family residences.
Going from there is a FHA loan, which generally requires 3.5 percent down payment. There are no upper income limits on an FHA, and you can, in theory, borrow up to $625,500. FHA loans must be for owner occupied homes, and currently there are no eligible condo projects in Eagle County.
FHA can be some of the most liberal in terms of income qualifications and credit history. All this does come with a price, though, and that price is a fairly high mortgage insurance premium up front and due at closing in an amount of 1.75 percent of the loan amount. The upfront premium can be financed, though. There is also monthly mortgage insurance.
Another option is the “My Community” program which requires 5 percent down. What is unique about this one is it has lower cost mortgage insurance than other 5 percent down loans. These loans are restricted to first time home buyers and there are caps on how much income the borrower can make.
Beyond that, one gets into what is known as “conforming conventional financing,” which is what most homeowners end up with. Typically one needs from 5 to 20 percent down payment, although for second home buyers 10 percent down is usually the minimum. If your loan amount is between $417,000 and $625,000, then you will generally need 10-20 percent down payment.If you are looking for a larger loan than $625,500 or buying a unique property such as a unit in a condo-tel, then you will get what is known as a portfolio loan. These loans generally require 20-40 percent down depending on the loan amount, property type and terms. You probably will not find a 30-year fixed term, but rather something fixed for five to seven years with an adjustable rate thereafter.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at www.mtnmortgageguy.com.