Minimum down-payments required:
- Conventional = 5% and it’s possible with no PMI!
- FHA = 3.5%
- VA = 0%
- USDA = 0%
If you are buying a home, it’s known as the “down-payment“…and if you already own a home and you are looking to refinance it’s known as your “equity”. Simply stated, it’s the difference between the value or price of the home and amount you are borrowing on the loan. We call it “LTV” which stands for “Loan To Value”, and it’s calculated by dividing the loan amount by the value of the home, or in a purchase situation the lower amount between the value of the home and the contracted purchase price.
The higher the LTV, the higher the risk to a lender because if you don’t pay the loan back they must acquire your property in a foreclosure. Well, if they acquire a property that is worth very close to or even less than what they loaned out, they will have a hard time getting their money back so the interest rates, costs, underwriting guidelines, documentation required, and just about everything else can be a little more difficult the higher the LTV.
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