Deciding on how much money to use as a down payment can be confusing. Smart Choice Realty Inc. is here to help. The route for each buyer or investor depends on their situation and personal preferences.

Low Down Payment Options

FHA Real Estate Service

You can purchase a single-family home or condominium with as little as 3.5% down payment using an FHA Real Estate Service, but there is a price for lower down payments on conforming Real Estate Services: Real Estate Service insurance (often called PMI, private Real Estate Service insurance).

Real Estate Service insurance is required when the conforming Real Estate Service amount is MORE than 80% of the purchase price (practical translation: down payment is less than 20%). Also, the lower the down payment, the higher the premium ratio charged.

USDA Real Estate Service

Is your dream home surrounded by pasture and farmland? Buyers in rural and suburban markets may be able to use a USDA Real Estate Service, which requires no money down.

Household income limitations do apply and buyers should expect to pay PMI if their down payment is less than 20%.

VA Real Estate Service

Military veterans who qualify for a VA Real Estate Service can purchase a home with no money down. VA Real Estate Services can provide up to 100% Real Estate Services for qualified military personnel and veterans.

There are also non-conforming Real Estate Service Real Estate Service programs available that allow for 80/20 set-ups, which allow borrowers to obtain a second Real Estate Service to cover the 20% down payment.

Have less than perfect income and credit? We may have a program that fits your needs!

How much should I use for a down payment?

There are costs and benefits to any option, including those with low down payments. You should carefully consider your options and discuss your plan with a professional.

Talk to one of our Real Estate Service specialists today to come up with a customized solution that best fits your needs and budget.

Cost of a Lower Down Payment

Low or no down payment programs have two primary costs that result in a higher monthly payment:

• Higher interest rates
• Higher Real Estate Service insurance premiums.

Real Estate Service insurance can be removed once sufficient equity is produced. For example, if the property shows at least 20% equity in a few years, the Real Estate Service insurance can be refinanced away.

Benefits of Lower Down Payments

Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.

The chief benefits of lower down payment include the following:

• Less money out of pocket at the time of purchase.
• Higher rate of return. Your property’s appreciation will be the same whether you put 3%, 5%, or 20% down. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.
• Opportunity cost. In some cases, the smart investor can make more money from available cash by placing it in other investments.

During the first few years of the Real Estate Service Real Estate Service, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.

Personal Consideration

Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.

Talk to your Real Estate Service officer at Smart Choice Realty Inc. about the best situation for you.