Down Payment

[Secollins23]

Do my husband and I need a down payment? We would like to purchase a home and both of our credit scores are over 700. Is it truly necessary to have a down payment?

[VolvoGirl]

That's up to the seller and your mortgage company.  Call around and see if anyone will give you 100% mortgage loan.  

[ghostlyone]

So, "no" is the answer lately because banks have been offering crazy mortgages lately. Shop around and you'll probably find one that will give you 100% financing. However, if you put down less than 20%, you will absolutely be paying PMI (private mortgage insurance). It costs 0.5-1.0% of your loan amount annually. So, roughing it out and simplifying, you get a $300k house, your total loan amount will be around $310k. Let's make you lucky and give you 0.5% PMI. So $310,000 x 0.5% = $1550. Divide that over 12 months and it looks like about $130 per month. That's $130 every month that you're giving the bank for no reason other than their own risk mitigation. It does nothing for you. You're basically paying the bank for the privilege of putting zero or very little money down on your house. You can eventually request that it be removed, but not until you have substantial equity in the home, which will take years.

Other than that, you pay interest on your loan amount, not the home price. So more money down = less interest paid to the bank.

Idk what your budget is, but go play with some online loan payment calculators. The good ones will let you adjust PMI, taxes, and insurance. 

[Opus 17]

If you are a veteran, I believe that VA loans can be 0% down.  Otherwise, you need to have a minimum of 3% down for an FHA loan or 5% down for a “conforming“ loan. A conforming loan is one that meets the standards of Fannie Mae and Freddie Mac, which means that it can be resold on the open market. If a bank makes a non-conforming loan they have to hold it themselves, and not many banks do that these days.  You might also be able to get a 0% down mortgage if the seller will hold the financing themselves.  As noted by others, the fees, interest rate, and mortgage insurance premiums are likely to be much higher on a 0% down mortgage than on a conventional mortgage.

The issue is not just your credit scores. Disasters and job losses can happen even to good people, and if you have nothing invested of your own money in the house, you are more of a risk for default. Or, if you lose your job through no fault of your own and can’t pay and the bank has to foreclose and sell, if they hold 100% or 95% mortgage, they will make back much less on the sale than they are owed.