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Do I Need a 20% Down Payment to Qualify for a Home Loan?

We're lucky to have guest blogger and my good friend, Bobby Wesley with CrossCountry Mortgage, tell us a story about a recent Open House he attended where he met a couple who ended up really benefiting because he dropped a little knowledge on them. Knowledge is power and this is a great example of why we should ask questions instead of just assuming something is a certain way! Call Bobby and ask him lots of questions. He can answer them all except whether or not Tennessee is going to have a winning season this year, but we already know the answer to that. Roll Tide!! :-) Call him at 770-510-6179 or email or click



I was working an Open House with a Realtor a couple months ago, when a husband and wife walked in. They were very open and honest from the get go, and let us know that they were driving by and just wanted to see what the inside of the house looked like. When the Realtor asked them if they were looking to buy or sell, the husband’s response was: “We’d love to, but we don’t have anywhere near the required 20% down payment saved up.” 

I overheard the conversation, and introduced myself. Their eyes about popped out of their heads when I told them that the minimum down payment requirement, since they already owned a home, was 3.5%. I explained the minimum down payment is 3.5% for an FHA loan and 5% for a Conventional loan (3% on a Conventional Loan for First-Time Homebuyers). When our discussion continued, I explained that on every loan where the buyer does not have a 20% down payment, there is Mortgage Insurance (PMI). Mortgage insurance is an extra fee included in the monthly payment, which protects the lender in case the buyer defaults. 

The Realtor and I met them for lunch on a Saturday, where we filled out the application and explained the mortgage process to them. Since it had been 10 years since they did any type of home financing, I wanted them to know up front how much things had changed. As I ran numbers for them, they were Pre-Approved for $350,000, well over where they wanted to be. However, they were thrilled because they never thought they could qualify for that much house. 

Two weeks after we met for lunch, they put their house on the market, and it was Under Contract in 5 days. It happened so fast, they had to move in with her parents for a few weeks, because it took them longer than expected to find their house. They went from a 2 bedroom 2 bathroom townhome to a 4 bedroom 2.5 bathroom single family home, and now they are expecting their first child later this year. That townhome would’ve gotten even smaller once the baby came, if they had not stopped in that Open House on that Saturday. 

So the moral of the story: Even when you’re kicking the tires on buying or selling a house, ask the professionals any questions that come to mind. Everyone’s financial scenarios are different, so if you are unsure if you can buy a home at this time, ask a Realtor or Mortgage Loan Officer. You may be surprised with what you find out…just because it’s on the internet, doesn’t mean it’s true.