Much of the home buying experience is fun and exciting, but when it comes time to discuss the financial side, it’s easy to feel overwhelmed. There was a time when purchasing a home meant having enough cash to put 20% down at closing. However, many buyers now are opting for mortgage programs that offer more flexible financing terms. How do you determine what’s best for you? Like any major life decision, weighing the pros and cons of different home loan options will be key to deciding the right fit for your financial situation.
What is a Down Payment?
When you buy a home, you know to expect a monthly mortgage payment that will be yours for 15 or 30 years, or until you’ve paid off the loan balance. The down payment, on the other hand, is a one-time cost that you will be responsible for paying at closing. Depending on the loan program you choose, your down payment could range from nothing all the way up to 20% of the purchase price.
Down Payment Options Available to You
There are many mortgage programs available that meet the needs of most homebuyers. Whether you have the resources to put 20% down or prefer to keep some of your savings and put a smaller down payment on your new home, you have options. In general, a conventional loan will require at least 3% down. If you want to avoid Private Mortgage Insurance, 20% down is required. Some government-backed loans range from 0-3.5% down, this includes FHA Loan, USDA Loan, and VA Loans.
Best Ways to Save For A Down Payment
The thought of saving thousands of dollars may seem overwhelming, but if you take it one step at a time, you will reach your goal and be on your way to becoming a homeowner in no time. There are several strategies that can help you get there even faster, including:
- Saving your tax refund
- Eating at home vs eating out
- Garage sale
- Toning down your inner weekend warrior
