One of the most common questions get from home buyers when they are starting the process of searching for a new home is, "how much money will I need at closing?".

Like most questions in life, the answer is, "it depends". 

Which mortgage loan product is best for you is an entirely different conversation and should be decided after careful deliberation with a seasoned, qualified mortgage lender [scroll to the end for a referral to our mortgage lender partner who will take amazing care of you].

There are essentially 2 components that make up the total amount needed to bring to the closing table when buying a home. Your down payment, and your closing costs. Your down payment is the percentage of the purchase price that you are not financing. For example in a traditional conventional mortgage buyer borrows 80% of the purchase price, leaving 20% of the purchase price needed as down payment. On top of the down payment will be all the various closing costs associated with purchasing a home. There are real estate costs like property tax prorations, deed recording fees, etc. And there are loan fees like origination charges, appraisal costs, etc.

When you add the down payment to the various closing costs you get the total needed to bring to the closing table. 

The closing costs can vary by area, loan type, property tax rates, etc. You'll want to consult your lender for a more precise calculation of those costs. In this article we'll focus on the down payment portion of your closing funds. 

FHA

  • 3.5% down payment required
  • Lower minimum credit score requirements than Conventional Mortgage Loans (As low as 600)
  • Higher Private Mortgage Insurance (PMI) premiums
  • PMI remains for the life of the loan. Must refinance with 20% equity to remove PMI
  • Higher debt-to -income ratio limits than Conventional Mortgage Loans gives the borrower more options if they do not qualify for Conventional Mortgage Loans
  • Quicker path to home ownership after Foreclosure, short sale, or bankruptcy


Conventional

  • As little as 3% down payment required if the borrower qualifies. Conventional mortgage products also available with 5%, 10% and up to 20% down payment. 
  • No PMI with 20% down payment
  • Lower PMI costs than FHA
  • PMI can be dropped from the loan once loan balance falls below 80% of value of home
  • FHA loans are capped at $275,665. Conventional loans have a higher limit at $424,100


VA

  • Qualifying active and retired military personnel are eligible
  • Zero down payment
  • No PMI
  • No pre-payment penalty for paying off loan early

Are you any of the following: active/retired military, police officer, firefighter, nurse, school teacher? Learn more about our Macomb Heroes program where you can get up to $2000 in closing cost assistance.

Macomb Heroes 

Home buyer benefits for the heroes of our communities.

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