In this episode of Tuesday Morning Coffee John talks talks about the different type of loans, and how much money you should put down on each of them.

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JOHN:  Hey, guys.  John Jones here with another edition of Tuesday Morning Coffee.  Today, we’re going to talk about how much money do you need to buy a home.  I get that question often, especially with all the changes that we’ve had in the lending environment here in the last few years.  Really, four loans we’re going to talk about, and I’ll go through them briefly.  There’s still the good old-fashioned conventional loan which requires the highest credit score.  And on a conventional loan, the least amount of money that you can get away with putting down is 5%.


That’s a 95% conventional loan.  There will be mortgage insurance until that gets to an 80% loan-to-value ratio.  And like I said, it requires to have the best credit score.  Another loan that we see a little bit down here in Rutherford County is the VA loan.  The VA loan still is a 100% loan if you have served our country and are eligible for this loan.  It’s also a loan where we can work usually the closing cost paid by seller into the contract negotiations.  So it is a loan where you can still get away with $0 down. 


The most popular loan and probably about 70 to 80% of what we see here in Rutherford County is the FHA loan.  And that is the government-insured loan that allows people to get into a home with the most lenient credit scores and lenient down payment.  But you still have to have a 3-1/2% down payment for an FHA loan.  That money can be gifted by a close relative.  There’s still going to be a little bit over 3% left in closing cost, but that can be negotiated in and paid by the seller if that’s what you need.  So 3-1/2% is what you would need on an FHA loan. 

Another loan that is out there that we see a little bit of is the rural housing loan, and that is subsidized by the Rural Housing Association.  And there’s limitations to this loan.  It has to be in certain rural areas.  There’s a map, so it can only be in certain areas, and there are income requirements.  A two-person family can only make so much money.  If you make too much money, then you wouldn’t qualify for that loan.  But that’s a 100% loan where the seller can pay all your closing as well.  So those are two loans, VA and rural home, although they’re not for everybody, that someone can still get $0 down into a home.


So the loans that we saw the last few years, the 80/20s, what we call the “liar loans,” those are a thing of the past.  You don’t see those anymore.  There are certain exceptions to that rule, but for the most part, we’re not seeing those loans anymore and I doubt we ever will after what we’ve just gone through.  So if you have any questions about any of this, please call us, 867-3020.  We’d love to help.