What Is A Down Payment?
There are many challenges that homeowners face when he or she enters the market to buy a home. The number one obstacle in the process of buying a home is to save enough money for a down payment. What is a down payment you ask? A down payment is a payment that equates to a certain percentage of the sales price of the contracted home that a buyer pays from their own pocket. (Some programs do allow gift money from a close family member or friend.)
A rule of thumb when trying to purchase a home- try to save enough money, i.e. a 20 percent of a down payment (the gold standard) when you are considering buying a home.
Let’s explain you the reasons why 20% is an ideal percentage for a down payment.
1. Increased chances of getting the mortgage
In today’s mortgage world, many banks will not qualify you for a home mortgage loan unless you can come up with at least a 20% down payment prior to buying your dream house. A increased down payments amount also will result in a lower monthly mortgage payment.
2. No PMI
If you want to avoid private mortgage insurance (aka lender’s mortgage insurance), you will need to put 20% down payment. What is PMI? PMI is an extra insurance that lenders require from homebuyers who are willing to obtain loan less than 20 percent down of the sales price.
3. Instant equity building
One of the biggest advantages of paying 20% down is the instant equity building of the property you decide to purchase. If the market turns down, that 20% down payment can safeguard you.
How Can You Save For A Down Payment?
The money can come from:
- Your personal savings
- Gifts and grants from family or friends
- The money you receive when you sell a house
Now, after you have read this whole article, you may think to yourself, I do not have 20% to buy a home. Lucky for you, United Financial Counselors can also help you with your down payment. We offer conventional loans, the 20% down payment that we just discussed, but we also have programs that help you MAKE your down payment or we also offer low down payment assistance programs.
To learn more about our convention and low down payment assistance programs. Please visit and set an appointment now! We would love to hear from you and help you buy your dream home!