Home Buying in Chattanooga>Question Details

Christopher…, Home Buyer in Chattanooga, TN

For first time home buyers, are you still required to place the traditional 20% down payments or are their other options.

Asked by Christopher Harris, Chattanooga, TN Thu Jul 11, 2013

We are trying to save up our 20% but we know it will be a few years before we reach our goal. By then we are afraid the housing market will not be as great an option as it is now.

Help the community by answering this question:

Answers

9
BEST ANSWER
Sally is right. 20% down only gets you out of Private Mortgage Insurance (PMI).

PMI gets a bad rep from people that don't understand what it is and why it helps. Banks like to have at least a 20% "cushion" of equity in case you default on your mortgage. They don't want to be stuck trying to sell a home worth $100,000 that you owe $95,000 on. Because they have to pay a realtor to list it and they may have to come down on price to sell it, they want that cushion of equity. This is where PMI comes in. The company providing the mortgage insurance makes the lender whole by providing them with this cushion if you default. So in essence, PMI allows banks to lend with confidence to borrowers with smaller down payments.

With that being said, a lot of people get hung up on saving up 20% to avoid PMI. Meanwhile, rates go up and the price of housing goes up as well and they miss out on the opportunity. It's called cutting off the nose to spite the face.

As Sally says, there are a number of options for lower down payments. The specifics really depend on your individual qualifications (income, credit, assets, etc). I work with a lot of buyers such as your self to help educate them on the process and review all their options. I'd be glad to assist you on this. Feel free to give me a call or email me.

Tony

Tony Grech
Loan Officer -NMLS #977416

WCS Lending, LLC
Tony.Grech@WCSLending.com
Toll Free: 866.936.5363 ext. 278
1 vote Thank Flag Link Thu Jul 11, 2013
The down payment is up to the loan package you qualify. For an FHA loan, the % is 3.5%. Depending on the location of the property, the USDA has loans with low down % also, Talking with a loan officer at a local bank is your first step to understanding your options. Credit unions and Bank and trusts are also lenders.
2 votes Thank Flag Link Thu Jul 11, 2013
As a first time homebuyer, if you are looking in Tennessee, there is a THDA loan available which does not require a downpayment. Also, some homes qualify for USDA loans which is another 100% loan. There are restrictions and qualifications on both of these loans. FHA requires only 3.5% down. I would recommend talking to a lender and getting approved for a loan to see what your options are and then begin your home search while the rates are still low.

I would be glad to assist if you need a qualified agent.

Thank you
1 vote Thank Flag Link Sun Jul 14, 2013
I agree with what Ms. Cope said above! There are some cases where no down payment is required. However if you already have some cash saved, it's wise to consider using it to reduce your monthly payment or to pay for closing costs which might strengthen the offer on the home you desire.
1 vote Thank Flag Link Thu Jul 11, 2013
The amount you pay down will largely depend on your financial status (credit score, ratios, income, debt, etc.) and the type of loan you want. Most buyers I'm working with, including many first time homebuyers, are going for loans where only 3.5% or 3% are required. If you haven't talked with a mortgage lender lately, you should make that your first call. If you need help or have other questions, I'll be happy to assist you.
1 vote Thank Flag Link Thu Jul 11, 2013
NO!!! You only need 20% down if you want to avoid mortgage insurance (which would be an extra cost to your monthly payment, or you could pay for it up front as part of your closing costs). With an FHA loan, you can put as little as 3.5% down. Sounds like you need to sit down with a lender who can explain all of your different loan options. With a conventional loan you can put anywhere from 5%, 10%, or 20% down. But again, anything less than 20% will require MI. Many lenders offer a MI buyout option that you can pay up front, and if you're asking the seller to pay closing costs, you can lump that in there. But again, you really need to talk to a local lender. Good luck!
1 vote Thank Flag Link Thu Jul 11, 2013
Many desirable locations in TN are still approved for 100% USDA financing. Please contact us to learn more..

USDA Mortgage Hub
100% USDA Rural Housing Loans
Serving all 50 states
Ph: 800-691-8826 (7 days a week)
http://www.UsdaMortgageHub.com
0 votes Thank Flag Link Sat Nov 7, 2015
As a first time homebuyer, if you are looking in Tennessee, there is a THDA loan available which does not require a downpayment. Also, some homes qualify for USDA loans which is another 100% loan. There are restrictions and qualifications on both of these loans. FHA requires only 3.5% down. I would recommend talking to a lender and getting approved for a loan to see what your options are and then begin your home search while the rates are still low.

I would be glad to assist if you need a qualified agent.
0 votes Thank Flag Link Thu Sep 12, 2013
Thank you guys sooo much for the awesome information. I will be contacting some of you in due time....

Thanx again!!
0 votes Thank Flag Link Thu Jul 11, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer