Coming up with enough money to afford a down payment is one of the major challenges of purchasing a home. Traditionally, it is often thought that a 20 percent down payment is required when buying a home, but you can actually purchase a home by paying as low as a 3% down payment. If you are interested in buying a home in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, the loan specialists at Foundation Mortgage can help you determine the best down payment option for your situation. Contact us today to learn more about 3% down conventional loans.
How Does a 3% Down Conventional Loan Work?
3% down conventional loans allow qualified home buyers who may not currently have enough available savings to afford a larger down payment the opportunity to still be able to purchase their own property. They are essentially intended to make home ownership accessible for otherwise qualified homeowners that may not have a substantial amount of cash saved up for a down payment. Unlike FHA loans, conventional mortgages are not backed by the government, so their qualification requirements tend to be a bit stricter, however, conventional loans offer several benefits, including: the opportunity to have your private mortgage insurance cancelled after your loan-to-value ratio reaches 78%, lower costs, (including the cost of the down payment), higher loan limits, great rates, and term flexibility.
The Types of 3% Down Conventional Loans Available
Fannie Mae has two types of conventional loans with a 3% down option; a “Conventional 97” loan, available to first time home buyers and comes with no income restrictions, and the “Home Ready” loan, available to buyers who have previously purchased a home and are purchasing a home in specific lower income areas. The “Home Possible Advantage” loan offered by Freddie Mac is similar to the Fannie Mae loan options and also offers a 3% down mortgage.
3% Down Conventional Loan Requirements
There are several requirements to consider when applying for a 3% down conventional loan, including:
- Proof of financial stability, including steady employment history and a sufficient amount of savings to cover the cost of several mortgage payments
- A credit score minimum of 620, however a higher score is more desirable
- You must have a fixed-rate mortgage
- The property must serve as your primary residence
- The property must be considered a single unit residence
- The loan amount must be at or below $548,250
Apply For a 3% Down Conventional Loan With Assistance
If you are interested in purchasing a home, but currently have a limited amount of funds for a down payment, a 3% down conventional loan could be a great financing option for you. The loan specialists at Foundation Mortgage can work closely with you to determine your eligibility and put you in your ideal home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee.