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Down Payment Requirements for First Time Home Owner Loans

When you're shopping for your first home, there are numerous things you'll end up needing to consider. Things like the total price of your home, its location, the interest rate of your loan, and other obvious factors will stand out. One thing that is often overlooked but that is incredibly important is the down payment requirement of a first time home owner loan. Even with a great credit score, the odds are good that you'll need some kind of down payment in order to secure your home loan – especially as a first time home buyer. So, understanding the lenders' down payment requirements is something that's very important.

Ask most people with any experience in the lending field or with buying a home, and they'll probably tell you that in most cases the standard down payment you'll need to shoot for is 20 percent. That can seem like a big number, and one that's often difficult for many first time buyers to reach. Luckily, it's no longer a hard figure and other options exist as well.

For example, private mortgage insurance could help you reduce the overall amount of a down payment needed to take out a home loan. This insurance policy will be required if you put less than 20% down on your mortgage, and is a way for the lender to cover their risks. However, in the long term it could actually cost more since premiums average around .5 and 1 percent of the total loan amount annually. That can add up.

In many cases, first time home buyers should at least consider using a government backed loan if they're struggling to come up with a large down payment. For instance, FHA loans are government backed loans with much lower first time home owner down payment requirements. In fact, down payments for these types of loans could be as low as 3.5 percent – a huge difference from the 20% standard many lenders still cling to. Other government loans also offer lower down payment requirements, so it's worth taking a look into these options.

  • The Federal Housing Administration Only Requires a 3.5% Down-Payment
  • Fannie Mae and Freddie Mac Require 3 to 10% Down-Payments
  • VA and USDA Have $0 Down-Payment Requirements for 1st Time Home Buyers

It's also worth looking into down payment gifts. Some loan programs allow borrowers to use cash from any source that doesn't directly benefit from the purchase of the home. This means that friends and family members could help you raise the down payment you're looking for.

Are you looking for a home loan program that requires no down payment? There are a few zero down mortgage programs available, but the guidelines require the borrowers to meet higher expectations and the rate and cost of this type of loan can be greater as well. When shopping ask the broker if you are eligible for a USDA or VA options.

In the end, the down payment requirements for a first time home buyer will really depend on the type of loan they choose to take out and on their credit score. Of course, having a larger down payment amount can help by securing lower interest rates and better terms, so if it's possible to do so you should attempt to get as much of a down payment as possible. It's not required, however, and you do have several options when shopping for a home if you want to do so without a large down payment.

Take a look at the different loan types out there and talk to several lenders. You may be surprised by the flexibility of down payment requirements in today's lending environment. Find Out Why Buying a Home Is Better than Renting.


First Time Home does not offer mortgages or direct financing. is a website that offers information about house financing and does not promise that all applicants will be approved for the new FHA loan program with lower mortgage insurance. This website and its affiliates have no affiliation with the FHA or any other government agency. This website offers information about lending services by publishing editorial content related to the U.S. finance sector.

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