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How much money do I need for a down payment?

“How much money do I have to have for a down payment?” This is a question I am asked almost as often as “What are rates today?” My hope is to give you a simple, CliffsNotes version (remember those?) of the VA, USDA, FHA, and Conventional loan programs. The great news is that each of these programs has low down payment options and is available here in Southeast Missouri.


The VA Loan…..This is an amazing loan program for veterans, active duty military service members, and their families. The VA Loan requires $0 down payment. You can finance 100% of the purchase price! Now, there are closing costs that need to be paid at closing. Be prepared for this.

Another huge feature of the VA loan, and it is huge, is that monthly mortgage insurance is NOT required. This means your payment will be lower than the other low-down payment options you will read about here; and you will pay back less over the term of the loan.


The USDA Loan (AKA, Rural Development)…..If you are not a veteran and live in any community in Southeast Missouri other than Cape Girardeau, the USDA loan might be a great option for you. This is also a 100% financing option. So no down payment required.

The USDA loan is geared toward low to moderate income, rural residents. There are set maximum income limits and debt-to-income ratio guidelines that must be met. Simply put, you cannot make too much money or have too much debt.

As with VA, and all mortgage loans for that matter, there are closing costs that will need to be paid at closing. Additionally, USDA requires 3 months reserves. This means you will need to have at least 3 months of your total mortgage payment in checking, savings, an investment account, etc. We will need to proof of these funds. Be prepared for this.

The USDA loan requires monthly mortgage insurance. It will be part of your monthly mortgage payment for the life of the loan. But, because the amount is based on a percentage of the loan amount, the mortgage insurance will decrease over time.


The FHA Loan…..This is probably the most popular loan program we have discussed so far. FHA does not have income or geography limits so it tends to be a better fit for more borrowers.

The program does require a 3.5% down payment. The down payment must be verified as your funds (meaning not a loan and  in checking, savings, or liquid investment account). However, these funds can also be a gift from a family member. The down payment plus the closing costs will need to be paid at closing.

There is a maximum loan amount of $275,665.

FHA does require monthly mortgage insurance. The mortgage insurance will be part of your mortgage payment for the life of the loan.


The Conventional Loan…..The conventional loan is the program most borrowers have heard about but may not realize that it does not require a big 20% down payment. You can actually put down as little as 3%.

In this low-down payment scenario, the Conventional loan does require monthly mortgage insurance. The difference is, once you reach 78% loan-to-value, the mortgage insurance will automatically fall from your payment. You can have the mortgage insurance removed at 80% loan-to-value if you can prove the equity. Sometimes that can require an appraisal and can be costly.

The interest rates for the Conventional Loan are much more dependent on credit score than the first 3 loan programs above. There are no income or geography limits with this program. There is a maximum loan limit of $417,000.


Are you ready to get Pre-Approved? We would love the opportunity to discuss your unique situation, get to know you, and find the best fit for you. Please reach out if we can be of any assistance.


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