One of the most common questions that comes up as people start looking to purchase a new home is, “How much down payment do I need?” The actual amount that is required will depend on the type of loan you are planning to get, and your own personal financial situation.
A down payment is cash you give to the lender when you get your home loan. It reduces the total amount you will borrow, and provides immediate equity in your new home. The down payment is calculated as a percent of the total purchase price, so a 20% down payment on a $300,000 loan would be $60,000, and you would borrow the remaining $240,000. For lenders, the down payment represents an initial ownership stake in the home, and can protect against future housing market fluctuations, making it a safer investment for them.
The minimum amount a lender requires you to put down depends on the type of loan.
Common Loan Types:
Most minimum down payment amounts are only available to borrowers with a high enough credit score, so your credit score may play into your down payment requirement, it just depends on the situation. There are also multiple options to pay for your down payment, don't let those two words discourage you from pursuing homeownership!
Just because you have more cash to put down than the minimum requirement to qualify for your loan doesn’t necessarily mean that you should put a bigger down payment, but in some cases that might make sense.
A higher down payment can get you:
While these are all great benefits, there are other factors to consider before you put down more than is required by your loan.
Create a budget of savings and costs after you move in to make sure you have enough before deciding on your down payment.
Call Integrity First Lending today to discuss your home loan options and down payment requirements.