While FHA home loans still remain an attractive option for many home buyers looking to put a smaller down payment on the purchase of a home, conventional loan down payment percentage minimums continue to decrease.
In fact, in today’s market in Arizona, while an FHA loan will require a 3.5% down payment, you can now obtain a conventional loan with mortgage insurance for as little as a 3% down payment.
Of course, conventional loans due require a buyer, especially when putting a smaller down payment have solid debt to income ratios and a good credit score. However, for certain buyers, there may be some advantages to looking at a conventional loan, as opposed to an FHA loan.
First, on a conventional loan, the debts of a disclaiming spouse, or in other words a spouse who chooses not to have ownership in the property, are not counted against the borrower. Nor is negative credit from a spouse who is not on the conventional loan with a spouse.
For instance, if you have a couple who was recently married and one of the two of them recently had a foreclosure or short sale under their name, then when attempting to obtain an FHA loan, both spouses would have difficulty qualifying because of an issue that occurred to one spouse prior to the marriage. However, in the case of a conventional mortgage, if one spouse can qualify on their own, than the other does not have to be on the home loan.
In addition, conventional loans do allow for higher loan limits, up to $417,000 and thus allow someone looking at a higher price range to still purchase a home with a smaller down payment.
These are just some of the benefits of using a conventional loan for the purchase of a home. While down payment requirements have been reduced, there are as mentioned still guidelines that must be met, especially when putting a smaller down payment down. However, for a home buyer with good credit and debt to income ratios, small down payments are now possible again.
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