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What to Expect with Low Down Payment Loans

Posted by admin on March 25, 2019
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A down payment is your offer to share the risk of financing your home with the lender by putting your own money toward the purchase.

Fortunately, there are programs that allow low down – payments, but be prepared for some caveats. These loans are available only on primary residences, not investment properties or second homes, and they come with higher costs in your monthly payments.The typical down payment to get the best interest rate and avoid mortgage insurance is 20% of the purchase price of the home. Anything less means the lender and guarantor such as FHA, VA or Fannie Mae, must ameliorate the added risk some way or another. So, what can you expect?

Expect to pay higher interest rates. Mortgage interest rates are variable, according to where you live, your credit, terms, and the amount of your down-payment. A low down-payment will result in a higher rate unless it can be offset by excellent credit or some other factor.

Expect to pay PMI. Private mortgage insurance, just like hazard insurance, will be added to your monthly payments. According to, you’ll pay approximately 0.20% to 1.50% of the balance of your loan. With the exception of FHA loans, PMI will end automatically when you build 22% in equity.

Expect to pay fees. On VA loans, there’s no PMI, but you will pay a fee of about 2.15% of the loan amount your first time, and 3.3% on the second home loan.

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