Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
The good news is that lenders over the last couple of years have become increasingly willing to finance as much as 95% or even 97% of a home purchase. The reason: They can now unload the risk of such loans onto somebody else. To limit their exposure many lenders regularly sell their loans to the Federal National Mortgage Association (Fannie Mae) which then bundles them into securities which are eventually sold to investors. It used to be that Fannie Mae only would buy loans for 80% financing. But it recently standardized the lending criteria for 97% financing and will now buy these loans making lenders much more willing to provide them to you with less mortgage down payment. It's now common for first-time buyers to put down only 5% mortgage down payment or $7500 on a $150000 loan.
While this sounds enticing remember that small mortgage down payments have their price. First of all you start with very little equity in your home. Also if you don't have 20% to put towards you mortgage down payment you'll probably have to ante up for mortgage insurance which protects the bank against default and can top $1000 a year if you put 5% down on a $200000 loan. Mortgage insurance rates are fairly standard but rates for adjustable rate loans and alternative credit can be much higher than a good credit fixed rate loan.
If you are buying in an urban area or have low to moderate income look into programs offered by your city or state that provide below-market loans with little or no mortgage down payment required. If you're really cash-strapped you can get 100% financing by "piggy-backing" a second loan equal to 20% of the purchase price on top of your 80% loan. But that 20% second mortgage will come at a much higher rate.
- What To Do When Mortgages Default
- Should You Refinance? Make Sure the Timing is Right
- How to Get Approved for an FHA Loan despite Bad Credit
- 3 Common Short Sale Mistakes
- Low Down Payment Loan Qualification
- FHA Loans for a First-Time Home Buyer
- What Lenders Don't Reveal About Home Equity Loans
- Appraisal Basics
- FHA Eligibility with Bankruptcy and Foreclosure