If you are considering buying a property in New Orleans through mortgage financing, one of the main things to look into is the down payment that you will have to make. A mortgage’s down payment is an amount of money put towards the purchase of a house that you will have to pay upfront. The down payment is by far the most expensive item on your list when buying a house.
The average down payment on a house in New Orleans is around $29,371. We can use the median household income to get a better sense of how much people earn and what they would have to pay to buy a house. In New Orleans, the median annual household income is $55,710. Therefore the down payment makes up 53% of this income.
The average down payment serves to simply give you an idea of what homeowners in New Orleans generally pay. However, the actual down payment you will make on a house will depend on several factors. These include:
Home Price
The down payment is stated as a percentage of the home price. This means that the higher the price of the house you are looking to purchase, the bigger the down payment you will have to make. For example, if you want to purchase a house that costs $200,000, and you make a 20% down payment, then you will have to pay $40,000 upfront. However, if you are considering another property worth $250,000, you would have to pay $50,000.
According to data gathered by Zillow, the typical value of homes in New Orleans is approximately $267,609. This is the average for middle price tier homes. If we were to assume a 20% down payment, then you would typically have to make a $53,521 down payment for a home in New Orleans. However, this is almost twice the actual average down payment that homeowners in New Orleans make, hinting that not everyone makes a 20% down payment.
Type of Mortgage
Another factor that influences the minimum down payment required is the type of mortgage that you are applying for. A list of these mortgages and their required minimum down payment is given below:
Conforming Loan – Conforming loans are insured by government sponsored agencies, such as Freddie Mac and Fannie Mae and lenders that offer these loans must follow the requirements set by these agencies. The minimum down payment required on conforming loans is 3%. However, borrowers must meet certain criteria, such as having a credit score of at least 620. Generally, conventional loans require borrowers to put down at least 20%.
Jumbo Loans – Jumbo loans are another type of conventional mortgages. They are used for borrowers who are looking to take out a loan that exceeds the local loan limits of the area. Jumbo loans have a minimum down payment requirement of 20%.
FHA Loans – FHA loans are aimed at low-income earners and are backed by the Federal Housing Administration. This means that if a borrower defaults on the loan, the government department will pay back the lender. Since they are aimed at borrowers earning low income, FHA loans have a lower down payment requirement of 3.5%. In order to qualify for the 3.5% down payment, you would need to have a credit score of at least 580. If your credit score is below 580 but higher than 500, then you are required to make a 10% down payment.
VA Loans – VA loans are backed by the Department of Veterans Affairs and can finance up to 100% of your home purchase, meaning that there is no minimum down payment. However, the only eligible borrowers for VA loans are veterans, service members or a spouse of a veteran or service member.
USDA Loans – USDA loans are backed by the US Department of Agriculture and are aimed at individuals who live in rural areas and earn low income. Similar to VA loans, there is no minimum down payment requirement for a USDA loan. In order to qualify for a USDA loan, you must live in a rural area that has a population of less than 20,000 individuals and your income must not exceed 115% of the area’s median income.
Down Payment Assistance
The Direct Homebuyer Soft Second Mortgage Assistance Program is offered to eligible borrowers by the city of New Orleans. The program aims to provide assistance to first time homebuyers to cover the down payment and closing costs of purchasing a house. The only individuals who can qualify for the program are the ones whose income does not exceed 80% of the Area Median Income. Eligible borrowers may receive up to $55,000 to cover the down payment and up to $5,000 for the closing costs.
Some of the requirements needed to qualify include:
- Completing Homeownership training by one of the HUD Approved Housing Counseling Agencies
- Qualifying of a first mortgage by an approved lender
- Income must not exceed 80% of the Area Median Income
In conclusion, purchasing a house and making the down payment for it in New Orleans is not cheap. However, depending on the property price range you are looking at, the loans you qualify for and whether you are eligible to get assistance in covering your down payment, you may be able to put down much less than the current average down payment made for properties in New Orleans.
