Not sure how much you should save for a down payment for a home?
This answer often depends on your situation. Read on to learn which down payment may be required for your situation.
$0 down Options
Down payment assistance programs can cover the cost of your down payment. In exchange for an increased interest rate on your loan, you may be eligible to receive cash for your down payment. This assistance often has income limits and credit requirements.
If you are a veteran, you may qualify for a $0 down loan. Veterans can use a loan type called a “VA Loan.”
Purchase a home in a rural area for $0 down. This loan type is called a USDA loan. Location and income limits apply, so not every situation qualifies.
3% down Option
Is your credit score over 640? If so, you may qualify for a Conventional Loan. These loans may only require you to purchase with a 3% down payment. When you purchase a $300,000 home, you will only need $9,000 as your down payment. It pays to have good credit!
3.5% down Option
If your credit score is under 640, and above 580, you may qualify for an FHA loan. You must put at least 3.5% down when using this loan. These loans are insured by the US government, so sometimes the interest rates are even better than private banks!
Benefits of putting more money down
You can benefit from putting more down than what is required by the bank. A larger down payment will often lower your monthly payment. A larger down payment may also provide you with more cushion if you need to sell the home sooner than you originally planned. You can also stay away from mortgage insurance if you put down as much as 20%.
If you already own a primary home, you rarely qualify for a down payment of less than 5% (but it’s sometimes possible!). Purchasing a second home is a riskier investment for the bank to make. Because the bank carries more risk, more cash is required from you upfront as collateral.
If you have more questions about cash you may need to have on hand (this often depends on market conditions), give me a call! We can discuss current costs that you may need to save for, such as… closing costs… inspections… and earnest money.
