Posted by admin on April 30, 2018
What is the Right Down Payment For You?
One of the biggest things to carefully consider when buying a home is how much down payment you can afford. For some home buyers, have a down payment is the biggest hurdle to homeownership. For others, determining the right amount may impact other financial considerations like how much money they will have left afterward to put towards things like repaying other loans or how much they have left for renovations. There is no one straightforward answer to the question, “How much should I save for a down payment on a home?” It will vary significantly based on the individual buyer, their finances, the length and type of loan, and other factors.
Generally speaking, it is best to put at least 20% of the total loan amount down when buying a home. So, if you are buying a home that costs $300,000, the down payment amount would be $60,000. And, while for some that may not be a major problem, for others that is a large amount to have saved up to buy a home. Just because 20% is the preferred amount, it does not mean that if you need to put less down you cannot buy a home. You can.
If you plan to put less than 20% down on a home you need to be aware of a few things. First, when you put less than 20% down you may not be approved for as much money. Additionally, you may not be approved for as good of an interest rate. But, you can still be approved! There are a variety of programs available for home buyers looking to put less than 20% down on a home and by speaking to a mortgage lender, you can find the right mortgage product for your needs. FHA mortgages require a minimum of 3.5% down and conventional mortgages require a minimum of 5% down. There are also other mortgages that only require 3% down. Further, if you put less than 20% down when buying a home you will have to pay private mortgage insurance (PMI) which is a small percentage that you pay each month as a protection for the mortgage lender. Carefully consider what you can afford and speak to a mortgage lender about loan pre-approval so that you can determine exactly how much you will need to put down to get the home you want.