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What is the Minimum Downpayment for a Conventional Loan?


The Spire

Many house owners are at least familiar with what mortgages are and how they work. However, prospective homeowners or aspiring real estate dealers are new to the term. A mortgage is a loan any prospective homeowners take from a lender to purchase or maintain a home and pays it back with time. Typically, the property (home or real estate purchased by the borrower) serves as collateral for the loan. To acquire a mortgage, a borrower, therefore, needs to make a minimum down payment.


A conventional loan or conventional mortgage is a type of loan taken by any prospective home buyer not offered by the government. Conversely, they are offered by banks, credit unions, and private companies who are collective, private lenders.



Here’s a case example:

John Smithers wishes to purchase a home valued at $400,000 and wants a mortgage from a bank to help him buy it. However, before being given the loan, Smithers is first required to pay a down payment (20% of the mortgage amount). Smithers will therefore have to dig into his pockets and pay $8,000 as an initial purchase of the home, and later, the bank adds the remaining $320,000.

The down payment is usually non-refundable if Smithers gets a change of will or reverses his decision to buy the home. 

Different elements dictate how to get a conventional loan, such as mortgages. Lenders need guarantees that, indeed, borrowers can make monthly mortgage payments. First, the mortgage payments do not exceed 28% of the borrower’s gross monthly income. They also need to ascertain that they can pay the initial down payment and other loan processing fees. A conventional loan officer also scrutinizes documents showing the borrower’s Asset value, employment verification, and proof of income to ensure that they can handle mortgage payments. 

Down payments of 20% apply to borrowers in conventional loans or mortgages. On the other hand, there are ways to buy a home with as little as 3.5% down payments, such as with Federal Housing Administration (FHA) loans. However, the difference between the two types of loans lies in the amount of monthly mortgages paid to the lender.

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.