How Much Do I Need For A Down Payment On A Home?

How Much Do I Need For A Down Payment On A Home?

 

How much money do I need for a down payment? I will count myself as rather surprised at how many home buyers think they need to save 20% for a down payment these days. Depending upon the loan program you could need no money for a down payment (such as a VA loan). There is a conventional loan that only requires 3% (if qualified). FHA minimum is 3.5% down. So there are several no or low down payment options. They may have some particular guidelines such as veteran status, credit score, property location, income, etc., that have to be met to qualify.

Of course the more one puts down affects the principal and interest payment, private mortgage insurance payment, etc.  Saving 20% down can be difficult, however, and something to be measured against delaying a purchase. What I hear most often is that home buyers think (a) 20% is the minimum down payment  or (b) the buyer doesn't want to pay PMI insurance.  

The fact is most of the first time home buyers I work with don't put down 20%.  If one were to weigh the option of saving the larger down payment against delaying a purchase for several years it is advantageous to buy sooner if one is going to be paying rent. Even if owning a home may not be a cheaper payment than rent,at least one is normally building some equity, as opposed to paying off someone else's mortgage. 

So the fact is, there are a variety of loan programs with little or no down payment requirements or the qualified borrower. For that matter several allow the down payment to be a gift, for instance from a relative.  Best practice when considering buying a home is to discuss the different down payment options with a loan originator. Then decide when is the best time to buy. No one knows what will happen to interest rates going forward but if rates go up a couple of points while saving a larger down payment it could wipe out the advantage of the larger down payment. 

I like to discuss the down payment options available to a home buyer and provide a comparison of how each program works to arrive at what is available. Then I can compare the pros and cons of minimum and maximum down payment as it relates to the monthly payment and overall goals of the home buyer. Key takeaway here is that in our market a typical first time buyer does not have to save up a 20% down payment for a conforming loan and assuming they are credit worthy. 

Comment balloon 2 commentsDora Griffin • January 28 2019 09:07PM
How Much Do I Need For A Down Payment On A Home?
share
How Much Do I Need For A Down Payment On A Home? How much money do I need for a down payment? I will count myself as rather surprised at how many home buyers think they need to save 20% for a down payment these days. Depending upon the loan… more
How Important Are Real Estate Taxes In Buying A Home?
share
How Important Are Real Estate Taxes In Buying A Home? Lenders use PITI (principal, interest, taxes and insurance) along with other debt to determine how much someone qualifies to buy. It is easy enough to calculate the principal and interest… more
I'm Self Employed, Can I Buy A Home?
share
I'm Self Employed, Can I Buy A Home? I had a call today from a self employed home buyer with questions about buying a home. He had called his banking partner and was told he needed two years of self employed income to qualify for a home loan and… more
WHEN CLOSING COSTS ARE LESS THAN SELLER AGREED TO PAY
share
WHEN CLOSING COSTS ARE LESS THAN SELLER AGREED TO PAY Before shopping for a home most home buyers will take into account their funds for down payment, closing costs and other out of pocket expenses. Depending upon the loan program these figures… more
Are Rising Rates Driving Home Buyers Away?
share
ARE RISING RATES DRIVING HOME BUYERS AWAY? In Northern Kentucky 2018 was a tough year to be a home buyer. Defined as a seller's market like most of the U S, if one were looking to buy you needed to be paying attention all the time. For home buyers… more
WINTER, A GREAT TIME TO SELL A HOME IN NORTHERN KY
share
WINTER, A GREAT TIME TO SELL A HOME IN NORTHERN KY. It seems winter came early to Northern Kentucky this year. We've had a couple of ice events already and accumulating snow in November is unusual for us. An ice storm in November brought down a… more
SHOP SMALL BUSINESS SATURDAY NOVEMBER 24, 2018
share
SHOP SMALL BUSINESS SATURDAY NOVEMBER 24, 2018 SMALL BUSINESS SATURDAY IS THIS WEEKEND! This is the weekend to think about what you are buying and determine if you can buy it locally. Support local retailers vs the big box stores. Your money… more
VA LOANS OFFER AWESOME BENEFITS
share
VA LOANS OFFER AWESOME BENEFITS VA loans offer awesome benefits to military home buyers or for refinance. Some of the benefits are: ZERO DOWN PAYMENT AVAILABLE (One can put down funds if desired) NO MONTHLY PRIVATE MORTGAGE INSURANCE GREAT… more
JUST VOTE NOVEMBER 6, 2018
share
JUST VOTE NOVEMBER 6, 2018 No matter who you vote for, no matter your party affiliation VOTE on NOVEMBER 6, 2018!!!! We in this country do not fully realize how precious our right to have our say about our government and ultimately our lives… more
What is going on with interest rates?
share
What is going on with interest rates? What is going on with interest rates? It's a volatile time in the long term interest rate market and here's my take on it as well as the prime rate. The prime rate and long term interest rate are two different… more