Worried about the down payment for a home? You might have saved enough already.
Getting a loan to buy a home might be easier than you think.
One of the biggest initial expenses homebuyers face is the cost of the down payment. That’s the amount of money you will pay out of pocket toward the cost of the home. The rest is what you’ll need to take out as a mortgage loan that will be paid off over time – usually 15 or 30 years.
The bigger the down payment you can make, the less money you’ll have to borrow, and borrowing less will mean lower monthly payments and less interest paid over the term of the loan.
But not everyone has a lot of money to put down – and that’s OK. Some loans might require a down payment of only around 3 to 5 percent, depending on the lending program and income guidelines. And if you are a veteran, you may qualify for a 0 percent down loan. Your lender might even have grant programs available to help you meet the down payment and closing costs requirements, so be sure to ask if you qualify for any special programs.
Depending on the size of payment you are required to put down, if you’re looking at a $200,000 house, a 3% down payment would only be $6,000, and the loan amount would be $194,000. But if you make a bigger down payment – say 20% - you’d only have to borrow $160,000, which would lower your monthly mortgage payments and reduce your interest costs
If the financial institution you are working with allows you to put down less than 20%, that lender may require you to carry Private Mortgage Insurance, or PMI, as part of your monthly mortgage payment. The cost of this insurance will vary depending on your down payment and credit score.
When considering buying a house, lenders will work with you to see if you qualify for a loan. Among other things, they’ll factor in how much you earn, how much you owe on other loans, and what your other regular monthly expenses are.
That’s why if home ownership is your goal, you should consult a lender to see what your options are and what you’ll need to do to make it happen.
Planning ahead can be a huge help and we’re here to advise you in any way we can – from ways to save for that down payment to what your mortgage choices are.
