A major step in the homebuying process is paying the down payment on a house. Deciding how much to put down can be tricky, however, and affects both your mortgage terms and buying experience in a number of ways.
To help you make the best decision, here are some key facts about down payments buyers should know:
Minimum down payment on a house
The required minimum down payment to buy a house depends upon the type of loan you apply for. Conventional loans, while not backed by the government, follow the same regulations as government loans and typically require a minimum of 3% down payment.
FHA loans offered by the Federal housing administration require as little as 3.5% with a solid credit score.
Loans guaranteed by the U.S. Department of Veterans Affairs generally don't require a down payment at all. However, these loans have specific eligibility requirements and can have higher interest rates.
How your down payment affects your offers
When market conditions are competitive, sellers will receive multiple offers for the same property. A larger down payment can give you a competitive edge.
However, it's important to remember closing costs when budgeting for your home purchase. Be careful of opting for a down payment that will leave you unable to afford the other expenses associated with homebuying.
The ‘right' down payment amount is different for everyone
The amount of down payment to offer is different for every situation. With a lower down payment, you may be required to pay private mortgage insurance, increasing your long-term costs. Lower down payments can also mean larger interest rates, which can add up considerably down the road.
Down payment assistance programs are available for first time buyers who need extra help to afford cash up front. Keep this and other options in mind when planning for your home purchase to ensure the best possible financial outcome.
About the Author
John Hassler
Our goal is overcoming the housing challenge and getting to know one another, here is a bit about me. Providing you with professional guidance for buying and selling homes stems from an in-depth knowledge of the Twin Cities Best Homes and Neighborhoods. For us, the process is a simple one and starts with a conversation about your needs, desires and concerns. No contracts or promises up front. I ask only for the opportunity to understand your housing needs and have you become comfortable with my real estate knowledge and experience. I have lived throughout the metro area, have sold close to 1000 homes as well as built, remodeled and designed homes. My passion is assisting you in discovering that perfect home, location and setting that will bring you and your family pleasure and comfort for years to come. I would enjoy the opportunity to meet with you at your home, business or over a cup of coffee. I am readily available by email, text and enjoy a phone call as well. Please don’t hesitate to contact me, as I always enjoy a new opportunity to help someone!
