Finding the funds for your home purchase

Getting a down payment together can be a challenge, but you may be further ahead than you think. While you may not have the cash on hand, there are resources you can tap, and a wide range of down payment options, depending on the loan you choose. We've got the low down on down payments.

20% is a myth

Let's get this out of the way right now. You don't need a 20% down payment to get a home loan. The minimum down payment required depends on the mortgage. VA and USDA loans can go as low as 0%. Certain conventional loans start at 3%. A very popular option, the FHA loan, starts at 3.5%.

A 20% down payment does bring certain advantages. You won't have to pay monthly mortgage insurance (MI). You'll have a wider choice of loans. 20% down, combined with a good credit score, may give you a lower interest rate. But it's not a requirement.

Why lenders want a down payment

Lenders need to know you'll pay your mortgage. They're lending you a large amount of money, so checking your income, assets, and credit are ways of seeing if you're creditworthy. If you also put your own money into the transaction, that's a measure of your commitment. The typical tradeoff for a down payment of less than 20% is MI, which protects the lender if you default on your loan. Once you reach at least 20% equity in your home, you may be able to remove MI and keep the same loan, but depending on your mortgage program, you may have to refinance.

Down payment sources

You probably know about some of these down payment sources, but there may be some pleasant surprises here for you! One caution. Down payment money has to be documented. You can’t make a large, undocumented deposit into your bank account during your loan process, or even a month or two before you apply. If you sell an expensive item online, be prepared to document the sale. If your aunt wants to give you a big check toward your down payment, there are gift funds rules.

Please note not all of the following are available for every loan. Talk to your CrossCountry Mortgage loan officer for more information.

• Proceeds from the sale of a prior home
• Money in savings or checking accounts
  • Tip: Open a separate down payment savings account
• Cash saved at home (must be documented and deposited in a financial account)
• Private savings club funds and similar accounts
• Savings bonds
• IRA/401(k) accounts
• Investments
• Gift funds (will require a gift letter)
• Proceeds from the sale of personal property
• State/city/community down payment assistance programs
  • Amount, type of assistance, and qualification vary widely by location
• Employer relocation assistance programs
• Employer home purchase programs
  • Most common in education and government sectors

Ready to learn more?

Your CCM loan officer can answer your down payment questions. Reach out today.