A down payment is a very important first step in buying and owning your own home. Having a down payment is a good sign that you’re ready to tackle home ownership and likely be able to handle the monthly expenses that come with home ownership; including the monthly mortgage payments, property taxes and any repairs that come up. Mortgage lenders require a down payment to help offset their risk. The larger the down payment the less they end up losing if they foreclose. If a buyer puts down less than 20% they will have to get private mortgage insurance (PMI). This insurance repays the lender a portion of the loan if it goes into default. You will need to remember that PMI insurance will increase your monthly mortgage payments. The size of the down payment can affect your interest rate. Most mortgage lenders will offer a lower rate to buyers with larger down payments.
The money for a down payment can come from several sources:
From your own savings
Gifts from family or friends
Profits from the sale of a home
Grants from nonprofits and employers
Most people understand that a 20% down payment is normally a good idea and in some cases a must. There are some loans out there, both VA & USDA Loans, that allow some qualified buyers to put down as little as 3% to 0%.
If you have questions on where to start or down payments please, Don’t hesitate to Contact Me!