Preparing your finances for the down payment on your next home can be the most stressful and cumbersome part of the home buying process. While most home buyers believe that they need to put down at least 15 percent of the total cost of the home this is not always the case.
The belief among 28 percent of prospective home buyers that they need to come up with such as large down payment to qualify for a mortgage is a misconception.Many home buyers can qualify for a conforming, conventional mortgage with a down payment of only five percent and even as low as three percent of the total home price. The number of Freddie Mac’s purchases of mortgages that had down payments of less than 10 percent more than quadrupled between 2009 and 2013. More than one in five borrowers so far in 2014 put less than 10 percent or less down on conforming, conventional mortgages.
As a result, more and more people are now able to qualify for a home loan. Qualifying for a home loan with a low down payment does depend on many other factors, including a home buyer’s credit history. A new survey by credit score company FICO asked credit-risk managers what the single most important factor is in a loan application. Surprisingly, it was not a buyer’s credit scores. The key factor is the Debt-to-Income ratio. DTI’s are the most direct indication to a bank or financial institution about whether a buyer is able to afford to repay the loan. It is also important to remember that any home buyer that puts down less than 20 percent will be required to purchase mortgage insurance.
For all of your luxury real estate needs in the Los Angeles, Beverly Hills, Calabasas and the Conejo Valley areas, contact Betsy Dittman. As a Coldwell Banker agent specializing in California luxury real estate properties, I can help you find your next home that will meet all of your needs, no matter your budget or down payment.