There are three types of financing: FHA, VA, and Conventional.  Conventional has three subsets: Conforming, High Balance Conforming, and Jumbo.  A question I have been asked frequently these days is, “So what is the minimum down payment?”  

FHA:
For purchase prices up to $722,750 in San Diego County, the minimum down payment is only 3.5%, all of which can come from a gift.  There is upfront mortgage insurance charged by the FHA of 1.75% of the base loan amount (going to 2.25% effective 4/5/2010) and a monthly mortgage insurance premium.  If a buyer puts 5% or more down, the monthly mortgage insurance premium factor is lower.

VA:
For purchase prices up to $437,500 in San Diego County, the minimum down payment is Zero.  Larger VA loans are available, but there will be a required down payment all of which can be a gift.  I have attached a chart showing the VA down payment amounts for several purchase prices.  VA loans do not have mortgage insurance, however, VA does charge a Funding Fee of 2.15% for 1st time use and 3.30% for subsequent usage.  Veterans with a service-related disability are exempt from the VA Funding Fee.

Conventional:
·         Conforming loans up to $417,000.  The minimum down payment is 5% for conventional conforming loans with Private Mortgage Insurance (PMI) approval.  PMI company guidelines are strict, so the larger the down payment the better.  If there is mortgage insurance, it can have a payment factor as high as 0.96% of the loan amount.  This would equate to a monthly amount of $160 on a $200,000 loan and $320 on a $400,000 loan.  There is no more mortgage insurance if the down payment is at least 20%.
·         High Balance Conforming loans – $417,001 to $697,500 in San Diego County.  Typically, the minimum down payment is 15%, but buyers are encouraged to put at least 20% down.
·         Jumbo > $697,500 in San Diego County.  Some lenders require a minimum 25% down payment, however, Primary Residential Mortgage will accept a 20% down payment for loan amounts up to $2mil (sales price of $2.5mil).

As long as your buyer has a minimum credit score of 620, they are typically eligible for FHA/VA financing.  However, Conventional financing is limited for those with lower credit scores.  In fact, most lenders will not allow a down payment of less than 20% if the credit scores are less than 720.

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