How to buy a house without putting down 20%
TL;DR:
- FHA loans offer a low 3.5% down payment but come with higher monthly payments and mandatory mortgage insurance.
- A 20% down payment on conventional loans eliminates PMI but requires more upfront capital, reducing liquidity.
- Sellers often prefer conventional loans due to lower perceived risks and smoother closing processes.
- Conventional loans may offer lower interest rates for high credit scores, while FHA loans are more accessible to those with lower scores.
- Conventional loans have higher loan limits compared to FHA loans, affecting purchasing power in expensive markets.
- FHA loans have strict property standards and appraisal requirements; conventional loans are more lenient, especially for renovation properties.
- The main downside of FHA loans includes mandatory mortgage insurance and property condition restrictions.
- Both loan types provide refinancing options, but FHA refinancing still involves mortgage insurance.
- The choice between conventional and FHA loans depends on individual financial situations, credit scores, and long-term goals; professional advice is recommended.