It’s a myth that you need at least 20% down to purchase a home, you actually only need at least 3.5%. If your FICO (Credit Score) is below 580, that minimum could rise as high as 10%.
Your DTI (debt-to-income) ratio is a major determining factor in how much you can borrow from a lender. Your Debt-to-income(DTI) ratio is the amount of your total monthly bills divided by how much money you make a month.
For instance, if you pay $2,000 a month for a mortgage, $300 a month for an auto loan and $700 a month for the rest of your bills, you have a total monthly debt of $3,000. If your gross monthly income is $8,000, you divide that into the debt ($3,000 / $8,000) and your debt-to-income ratio is 37.5%. Most lenders would like (would like as in not necessary) your DTI (debt-to-income) ratio to be under 35%. The good news is that, you can receive a qualified mortgage with as high as a 43% debt-to-income ratio.
The minimum down payment required to buy a home in California is determined by several factors. Your credit score determines what type of loan you will be qualify for, then depending on the type of loan, you will have to meet certain requirements. For example, for a 30 year Conventional Mortgage, with a fixed rate, it is usually required to have a minimum down payment of 5% of the home purchase price. So if you are interested in buying a home that is $350,000, then 5% of the purchase price would make the required down payment to be at least $17,500. Let’s also assume that your FICO Score meets the requirements for a Conventional Mortgage, which is a minimum credit score of 580 or more. For an FHA Mortgage, which is federally backed up, the minimum requirement of a down payment is 3.5%, but your credit score has to be 580 or higher to put this amount down. If your credit score is lower than 580, then you will have to put at least 10% down payment for your home.