You’ve probably heard that a 20% down payment on a home isn’t a must-have anymore. There are mumblings about low down payments and even skipping the down payment altogether!
This should be good news, but it adds to the confusion about mortgages for some people. How much money do you really need for a down payment? Who is eligible for a low- or no-down-payment mortgage?
The answers to these questions are not the same for everyone. Today we’re going to shed some light on the truth about down payments. Here are three things that might affect how much cash you’ll shell out upfront for a home:
Factor #1: The Home’s Purchase Price
No matter what, a down payment for a $100,000 home looks significantly different than a down payment for a home that costs $1 million. Chances are that the price of the home you have your eye on lies between these two numbers. If you fall in love with a home but can’t afford to put the percentage down on it that you would like, you will need to decide if you want to apply for a low-down-payment mortgage or adjust your housing budget.
Factor #2: The Type of Loan You Select
Loan programs are available specifically for people who can’t afford to put 20% of the purchase price down on a home. For example, you can get a conventional loan with as little as 3% down. FHA loans require a 3.5% down payment. If you go for one of these options, remember that you’ll have higher monthly payments than if you put 20% down. You’ll also be responsible for a mortgage insurance payment.
Factor #3: Occupancy Type
If you’re purchasing a primary residence, plenty of low- and no-down-payment options are available. If you’re buying a vacation home or an investment property, be prepared with at least 20% of the purchase price.
Do Zero-Down Programs Really Exist?
Yes! USDA and VA loans offer zero-down options. Remember, zero-down doesn’t mean that closing is free! You’ll still be responsible for closing costs, and they add up quickly! That said, USDA and VA options open the door to homeownership for many who struggle to save for that elusive down payment.
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Are you in the market for a mortgage? Contact us today to go over down payment options for your situation!
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