How much down payment do I need to purchase a home?
The answer to this question will depend on the type of loan you are looking for and what your buying needs are.
Down payment is the amount of money that you pay the Seller from your own funds during the purchase of a property. The majority of it is due during the closing process and you usually pay a part of your down payment when signing a Purchase Contract with the Seller. Lenders express down payments as a percentage of the total loan amount. For example, if you buy a home worth $100,000 with 20% down, that means you have to spend $20,000 as a down payment.
There are loans available with a very small down payment (starting at 3% for a conventional loan), where all the verifications are needed (income, bank statements, etc) and there are also loans with a bigger down payment of 25-30-40%, but very little docs needed to qualify. The more you invest in your own property right away, the more confident Lenders will feel giving you a loan and more favorable terms. Of course, other factors still apply, such as: your credit score and credit history and your capacity for a mortgage payment every month. Interest rates vary as well. But essentially it is your choice as a Borrower to pick the program that best suits your needs and wants.
We are here to help you in this process.
Benefits of a larger Down Payment
1. With putting more money down you can qualify for a better mortgage interest rate.
2. Putting at least 20% down on a property will allow you to avoid mortgage insurance on a Conventional mortgage loan, which will lower upfront and ongoing fees.
3. You get more equity in your home right off the bat, which makes it beneficial to refinance with a cash-out later.
4. You get a lower monthly mortgage payment, which leaves room for your other expenses.
5. You pay less in interest over the life of the loan as you owe less to the Lender, which can save you thousands of dollars.