If you’re planning to take out a mortgage to buy a home, you will likely need a down payment. In other words, you will probably have to pay some cash upfront in order to get a home loan.
How much money will you need to save up? Mortgage lenders often prefer 20 percent down payments, but you can buy a home with less. Here’s what to consider as you make plans to become a homeowner.
Mortgage Down Payment Minimums
Though you can buy a home with less than 20 percent down, most mortgage programs have minimum requirements. They type of home loan you take out will dictate how much cash you will need:
- FHA loan – 3.5 percent of the purchase price
- HomeReady loan – 3 percent of the purchase price
- Conventional loan – 3 percent of the purchase price
With VA home loans and USDA loans, no down payment is required. These mortgage programs allow you to finance 100 percent of a property’s purchase price.
Keep in mind, though, that these are minimum requirements. You can choose to put more money down if you like.
When a Smaller Mortgage Down Payment Makes Sense
Putting down the minimum amount required can be a smart approach for some aspiring homeowners. Reasons to pay less upfront include:
- Saving up will take less time, allowing you to buy a home sooner
- Putting all of your cash down may leave you with little for emergencies
- Keeping some money in savings means you’ll have funds for home improvements
Advantages of Making a Larger Mortgage Down Payment
The more money you pay upfront when you buy a home, the smaller your home loan. Borrowing less money offers several benefits:
- You pay less in interest over the life of the home loan
- You may qualify for a lower mortgage interest rate
- Your monthly mortgage payments will be lower
- You will likely have an easier time qualifying for additional financing
Furthermore, if you put down at least 20 percent when you buy a home, you can skip paying for private mortgage insurance (PMI). The annual cost of PMI can be as much as one percent of your home loan amount – and it can add hundreds to your monthly mortgage payment.
In the end, only you can decide how much money to put down. But if you want expert advice and guidance through the mortgage process, turn to the professional team at Integrity First Lending.
Our friendly loan officers have decades of combined experience in the Utah home lending industry. We can explain your mortgage options, answer your questions and help you shop for a home loan with excellent terms.
If you’re ready to buy a home in Utah, contact Integrity First Lending in South Jordan or Tooele to discuss your mortgage down payment and find your ideal financing solution.