+24 votes
by (9.6k points)
Sorry for the possible dumb questions and potentially long post but I really need some clarification on these key questions I have.  Conventional loans require MINIMUM 20% down? No way we can save that so we have no choice but to do FHA. FHA is a minimum of 3. 5% down (much more reasonable) but there’s extra monthly bills with that? Like mortgage insurance? And what else? A couple years ago I took the downpayment assistance course so I qualify for that as well which wraps a down payment of up to 4% into a interest free second mortgage. But from my online reading, if we refinance down the line that could effect the second mortgage so we want to read any contract thoroughly.  We want to buy a townhouse within the next year for $300k max. We have been deep into the Dave Ramsey debt pay off. We paid off one car last month and our last credit card should be paid off the end of this month, that leaves our SUV payment (2 years in on a 7 year term). Our plan has always been to continue snowball on the SUV then move to saving and buying a home. With recent events and the constant posts I see in financial groups (not just this one), lenders have tightened up requirements and some have been asking people to have X amount of money in the bank for X period of time. I’m sure the banks want to make sure people are financially stable and have reserves if something like COVID happens again. So we are now thinking when the CC is paid off to save our $10k we planned for the townhouse (I would love $15-$20k but I’m being realistic) and then go back to extra SUV payments. Has anyone else had to make savings or home purchase changes due to lender requirements changing?  
Sorry for the possible dumb questions and potentially long post but I really need some clarification

20 Answers

+13 votes
by (3k points)
We have a conventional loan and we didn't have the full 20%. We have to pay PMI until the loan to value reaches the 80%, though. However. We owned the land prior to financing, so idk if that makes a difference
by (9.6k points)
@pompidou what percent did you have to put down if you don’t mind me asking?  
by (3k points)
@finicky2385 um. not sure. About 15% I think. The loan was for 147000 and the appraised value was 175000. Honestly, if given the chance, we'd have saved the full 20, but our house (mobile home) burned, and we wanted back home.  
+14 votes
by (1.9k points)
We only went conventional loan when we sold our first house. use profits for the loan.  
+23 votes
by (6.2k points)
Conventional loans do not have to have 20% down, but you will most likely have to pay PMI (private mortgage insurance) if you don’t have 20% down. We have a conventional loan and put about 8% down and will pay PMI until our loan reaches 80% loan to value.  
by (9.6k points)
@kenley did you lender tell you a minimum you had to put down or did you guys say you only had 8% at the time? To drop PMI do you have to refinance or do you get to just cancel?  
by (6.2k points)
@finicky2385 Our lender required 3% down, but we had 8% so that’s what we did. Legally your lender has to automatically drop PMI at 78% loan to value, but you can request it be dropped at 80%. No refinance required. That is one of the benefits of conventional vs FHA. FHA loans require mortgage insurance for the life of the loan and conventional does not.  
by (9.6k points)
@kenley that’s great info thank you! I didn’t realize you had options like that
+7 votes
by (1k points)
Do you have an emergency fund? Honestly, it’s very risky to take on a mortgage like that and home ownership without an emergency fund. So many things come into play like appliances, repairs, taxes, etc. plus there is PMI and i would highly recommend term life to cover payoff in case of death if one of you. There are so many things to consider. I’d wait until you pay off SUV and save an emergency fund.  
by (9.6k points)
@mirtamirth8107 our emergency fund is already completed. Now that we are approaching the cross roads of the last few steps that’s why I’m evaluating. Towns houses for sure have emergencies and that’s why I want that nest egg ready and definitely why we aren’t ready for a whole house that can have even more issues that a townhouse. Is term life different than a life insurance policy? We both have life insurance policies already.  
by (1k points)
@finicky2385 , don’t let the mortgage company sell you life insurance is what I’m saying—just get that covered on your own with term life. I’d want to cover the mortgage payoff plus what you would need if the other person tragically passed. Just wanted to bring that up. You’ll still have to pay for the PMI since you have less than 20%.  
+7 votes
by (2.1k points)
You can get a conventional loan without putting 20% down. We put 5% down. However, your mortgage payment will be higher until you reach the 80% mark due to mortgage insurance. Once you reach 80%, then the mortgage insurance will be removed. Or you can refinance your house later on down the road when you think the value is where it should be and then refinance and have the mortgage insurance dropped (this is what I did). My first house loan was FHA. I put down 3. 5%. Yes, there is mortgage insurance rolled in to the mortgage payment. It also varies by state, but there will be a maximum loan amount if you do FHA whereas conventional, it’s possible you can qualify for more house loan, depending on your DTI. Due to COVID, I’m sure there are going to be changes and adjustments. These will just be things that the lender will need to disclose to you.  
+1 vote
by (3k points)
We got a conventional loan and didn't have to put 20% down but have to pay PMI (which drops off after ten years or once u have it down to a certain percentage)
+5 votes
by (7.5k points)
No conventional you do not need 20% down. I think you only need 5% we have went in with a little over 6% when we bought our home 3 years ago.  
+12 votes
by (470 points)
I got a conventional loan with only 5% down. I had mortgage insurance until I reached less than 80%.  
by (470 points)
The laws were just changing for FHA PMI being the life of the loan and I wanted no part of that.  
by (9.6k points)
@anastrophe3 ya see me either I don’t want an extra bill for the life of the loan just cause I didn’t have the initial cash. But I’m wondering if the PMI is still required if we refinance down the line
by (470 points)
@finicky2385 I was concerned when I would be able to refinance at a good rate.  
by (470 points)
We put down a little more than required by our lender because I wanted a certain mortgage payment plus we made sure we had at least 2k left in our emergency fund. Oh the things you discover after you close.  
by (1.9k points)
@finicky2385 As long as you have 20% equity in the townhouse and refinance with a Conventional loan you won't have PMI. With our first house we had a FHA loan and were able to refinance to a Conventional and drop the PMI after 3 years because it appreciated sooo much. That of course depends on the housing market in your area.  
+17 votes
by (8.7k points)
We only had to put down 5% down for a conventional loan but some first time homebuyer loans allow you to put as low as 3. 5% down
+12 votes
by (1.3k points)
We did conventional with 5%
+15 votes
by (2.2k points)
There is a conventional with3% down for first time homeowners, then a 5% down conventional
+13 votes
by (1.9k points)
Also you need to factor in closing costs and fees when getting a mortgage, not just down payment. We are in the process of buying right now and lenders are tightening up requirements. When we first started the process we were going to do a Conventional with 5% down, but they tightened the DTI figure so right now we are going with an FHA with 5% down. We're trying to see if we can work the numbers to qualify for the Conventional before closing (estimated in October -- we're building). We are just over the DTI cut-off  
+20 votes
by (13.6k points)
I worked for a mortgage company about 8 years ago, even back then you had to have money for a certain amount of time. They want to make sure someone didn’t just hand you the money and that you can afford it, basically.  
+19 votes
by (12.6k points)
We are closing on a conventional loan 5% down.  
+22 votes
by (820 points)
We did conventional loan 15 years with 3. 5 or 5% I can’t remember. PMI came off after 3 years on its own.  
+1 vote
by (5.6k points)
Following, I’m also in the market for a townhouse. I’m looking into down payment assistance through the city, but not sure how it all works. I’m researching various pages on our city’s housing website.  
by (9.6k points)
@piaffe in my area you have to take a class and get a certificate (our lender set up the class for us). Then once you qualify the bank you’re working with will put up to 4% of the home value down as your downpayment but the 4% goes into a second mortgage on the house that’s interest free until the main mortgage ends. So if you get a 30 year mortgage then after 30 years the second mortgage starts collecting interest. That’s how it was explained to me.  
by (5.6k points)
@finicky2385 I see, thank you. I took a homebuyers class and received a certificate of completion. According to my city’s website, I now have to take two more classes at the housing dept which is closed because of covid19. Trying to save, pay off my remaining debts and learn as much as I can before the office reopens in a few months.  
+4 votes
by (3.5k points)
Speak to a mortgage broker but no, conventional ranges based on your specific financial situation and the lender. I have a conventional client right now that is 93. 7% conventional.  
+13 votes
by (1.7k points)
I used downpayment assistance when I bought my house 5 years ago. Mine was forgiven as long as I stayed in the house for two years. It dropped off after that, so if I decide to refinance in the future to get rid of PMI it shouldn’t be a problem. It likely depends on the lender.  
by (730 points)
@heterolecithal what lender did you use?  
by (1.7k points)
My mortgage lender was a local bank. I can't remember off the top of my head where the downpayment assistance came from.  
+24 votes
by (2.7k points)
We have a conventional loan and are putting 10% down, but do have to pay PMI
+4 votes
by (2.8k points)
We did a conventional loan with only 5% plus closing costs and fees down through Wells Fargo
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