The 30-year fixed-rate mortgage loan is by far the most popular of all the home loan options. So lately, we’ve been publishing a series of tutorials on this particular product. Today we’ll answer the question: What are the down-payment requirements for a 30-year mortgage loan?
The short answer is that it depends on the type of loan you’re using.
VA-guaranteed mortgages, for example, allow the borrower to finance up to 100% of the purchase price. The FHA loan program allows for a down payment as low as 3.5% of the purchase price. Some lenders today are offering conventional (non-government-insured) loans with down payments of 3%. And all of these programs offer 30-year fixed-rate mortgages.
Down-Payment Requirements for a 30-Year Mortgage
Down-payment requirements for a 30-year mortgage vary from one borrower to the next. The type of loan being used (i.e., conventional vs. government-backed) also plays a part.
If you’re looking for a “regular” conventional mortgage loan — one that is originated and insured within the private sector — you might be able to make a down payment as low as 3%. That’s the minimum for most of the lenders we’ve heard from.
The Federal Housing Administration (FHA) loan program has a down-payment requirement of 3.5% on all loans, including the 30-year mortgage. But these funds can be provided by a third party, in the form of a gift. So they don’t necessarily have to come out of the buyer’s pocket.
Some conventional loan programs allow for down payment gifts as well. This is a great option for borrowers with limited funds saved for the upfront investment. It allows you to obtain third-party financial assistance from an employer, a close friend, or even a family member.
Most military members and veterans with honorable service qualify for the VA loan program. And there is no down-payment requirement for a 30-year fixed mortgage when using this program. Borrowers can finance 100% of the purchase with a VA loan.
Jumbo Loans Often Require More Money Down
A jumbo loan is one that exceeds the maximum size limits for acquisition by Freddie Mac and Fannie Mae (the two government-controlled corporations that buy and sell bundled mortgage loans in the secondary market). A jumbo or “non-conforming” loan cannot be sold to Freddie or Fannie.
Bigger loans are a bigger risk to the lender. So borrowers who use them often encounter higher down-payment requirements, sometimes up to 20% or more. But it varies. Some lenders that offer jumbo mortgage products will allow for smaller down payments. So you really have to shop around.
According to Craig Olson, senior vice president of mortgage operations for Pentagon Federal Credit Union: “Private mortgage insurance is not typically available on jumbo loans, which is one reason borrowers usually need to make a down payment of at least 20 percent, although some lenders make exceptions for well-qualified borrowers.”
From what we have gathered, these “exceptions” are more common these days, in 2017. It seems that many lenders are more flexible these days, when it comes to the down-payment requirements for a 30-year jumbo mortgage loan. So again, it pays to ask around.
A 20% Investment Is Not Always Required
There is a common misconception among home buyers and borrowers that a 20% down payment is required for most home loans. But, as we’ve just discussed, this is not the case. There are many loan options today with down-payment requirements below 20%, including 30-year fixed-rate mortgages.
If 20% were the standard requirement for all loans, the mortgage industry would lose a lot of business. The truth is that most borrowers simply can’t afford to make a 20% investment when buying a home. That’s why the average down payment falls below the 20% mark. So, in order to increase their loan volume, mortgage lenders offer some options for borrowers with limited funds.
Continued: This article explains the minimum down-payment requirements for a 30-year fixed mortgage. You can continue your research by learning about the advantages and disadvantages of this particular loan option.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author