Down Payment – How Much Do You Need?

    Gone are the days when anyone could buy a home with just a promise and signature. No documentation loans allowed virtually anyone to buy a house with no money down with just a simple credit check. After the mortgage meltdown of 2007, this all changed. Lenders tightened guidelines and down payments were back.

    But how much do you actually need? Must you always find 20% down? The answer might surprise you; there are many ways to buy a home with less than 20% down payment.

     

    • 0% Down – There are still two loan programs which allow one to buy a home for no down payment; the VA loan and the USDA loan. The VA loan requires the borrower to be a qualified service person or veteran and the USDA loan is for certain areas under the Department of Agriculture.
    • 5% Down – Conventional loans with loan limits can allow one to buy a home with as little as 5% down. These loans do have PMI (Private mortgage insurance) which can be eliminated when the loan amount falls below the 20% threshold.
      Let’s break that down, if you are buying a home that is priced at $250,000, a 5% DP would be $12,500. If you saved $1,044 per month, for a year, you would have five percent.
      Not bad.
    • 3.5 % Down – FHA offers first time home buyers a good home loan for only 3.5% down payment. Again these loans have loan limits and PMI but offer a faster entry into the housing market.
      SO, if you are buying a home that is priced at $250,000, a 3.5% DP would be $8,750. If you saved $730 per month, for a year, you would have three and a half percent.
      Really, not bad.

    Buying a home doesn’t always mean 20% down (On a 250k home, that’s $50,000). If you’re considering buying a new home, talk to your lender about your options. There are also online mortgage calculators that can help make the numbers more real. Click here to try this one from NFM Lending. Also, check out the options for down payment assistance. The North Carolina Housing Finance Agency, offers programs that can help first time home buyers, buyers that are looking to “move up”, military veterans, etc.

    We help people everyday that have questions about down payments and we would be more than happy to get you in touch with our preferred lending company.

    Are you struggling to start saving or would you like to save faster? Check out this article from Dave Ramsey. He is my go to online source for financial advice.

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