Range of Colorado Conventional Mortgage Solutions
Conventional mortgages have historically been considered a twenty percent down mortgage solution for buyers with great credit. This is no longer the case.
Conventional solutions now exist for borrowers with expanded credit needs. This is true for all solutions discussed below, with the possible exception of the very high LTV solutions. Talk with your mortgage consultant about your situation to see if the solution you're interested in is available.
How Much Do I Have To Put Down?
Potentially as little as nothing down, depending on your credit profile. It is important to understand that the less you put down (less than twenty percent) the higher the incremental risk. This risk is traditionally offset with private mortgage insurance, sometimes with an increase in rate instead of and/or in addition to private mortgage insurance.
Fannie Mae and Freddie Mac offer hybrid mortgage solutions where the loan is configured to avoid mortgage insurance. Hybrid solutions are available for as little as zero down (described as an 80/20 - eighty percent first mortgage and a twenty percent purchase money second mortgage). The 80/20 solution comes at an increase in cost for both the first and second mortgage due to the increased risk of this mortgage (the borrower has no risk in the transaction).
Other hybrid solutions (80/15/5 - eighty percent first, fifteen percent second, five percent down; 80/10/10, etc.) may come at a small increase in closing costs (due to Fannie or Freddie, not the lender) as well as (potentially) higher second mortgage rates.
The fact that these solutions may be available to you as a borrower does not necessarily mean a hybrid mortgage is the best solution for your circumstance or needs. Your mortgage consultant will help you evaluate these options in great detail, to help you understand which options are best for you.
What is a minimum investment?
The minimum investment is the amount of money that the borrower is required to come up with on their own (no gift money, down payment assistance, etc.).
The standard minimum investment for a conventional loan is five percent. For most of the zero down conventional solutions the borrower is required to bring three percent (in some cases, this can be a gift - talk with your mortgage consultant for the specifics). Fannie Mae recently introduced a zero down solution that requires only $500 of the borrower's money.
An exception to the standard investment is when at least twenty percent (of the purchase price or appraised value) is gifted, in that case, the entire down payment and cash to close may be gifted.
What other solutions are available?
Conventional mortgage solutions are not limited to thirty year or fifteen year fixed rate terms. Adjustable rate mortgages (ARMS) are also available as conventional mortgage solutions.
Completely summarizing the full range of solutions available with conventional mortgages is not instructive. The important detail to understand is that many options are now available to serve a broad range of credit and credit profiles. Speaking with your mortgage consultant will help you more completely understand how these varied solutions apply to your specific situation.
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