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 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. Borrowing less means lower monthly payments and less interest paid over the term of the loan.
20% Down is Not Required
Not everyone has a lot of money to put down – and that’s OK. Some loans require a down payment of only 3 to 5%, and some offer 0%, depending on the lending program and income guidelines.
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 you put down less than 20%, you will be required 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.
Contact a Mortgage Counselor To See What's Possible
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.
If homeownership 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.
The experienced Mortgage Counselors at Baltimore County Employees Federal Credit Union can help you choose the loan option that works best for you. Visit us online or contact us at 410-828-4730, 800-234-4730, or mortgages@bcefcu.com.