If you're looking to purchase a home with a down-payment lower than 5%, you have more options than ever—and that's great! But it can make your decision a little harder. In the past, if you were putting down less than 5%, you would have to get an FHA loan or a similar type of loan. Now that you can put down as low as 3% with a conventional loan, you may be wondering which option is best for you.
FHA Loan vs. Conventional Loan
FHA loans require a down-payment of at least 3.5%. You may still qualify for one even if your credit history isn't great. The downside is that with an FHA loan, you may have to pay more up front in fees, and you may have to pay mortgage insurance for a longer time.
Conventional loans allow for down-payments as low as 3%. But they may also require a stronger credit history and a stronger overall financial situation. Those who qualify for a conventional loan with a 3% down payment won't have to pay mortgage insurance for as long—just until the borrower pays off enough of the loan.
Both are great options, but the loan program that's best for you will depend on your financial situation. If you're hoping to buy a home in the near future but won't have enough saved for a large down-payment, there is no need to worry. You can get into a home you'll love. Someone on the TruStone Home Mortgage team can help you choose the loan product that will work best for you.
Please contact us if you're ready to start the home buying journey.
Editor's note: parts of this article were sourced from Forbes and My Mortgage Insider.