q&a: Do I need a down payment?

 

 

: I've heard mixed messages from my friends on whether or not I need a down payment to buy a house... Or if I do need  a down payment, how much it should be. I want to start gearing up to move in the direction of homeownership, but how much do I need to save?

 : This answer isn't a black and white one.

Let's bite this off in pieces.
 
 

 

First... "do I need a down payment?"

 

No, you do not need a down payment if you fall under one of these categories:

• You are an eligible veteran under the Federal VA Home Loan program
• You are planning to buy a home in a rural area that is of modest value, and you do not exceed certain income levels under the USDA Guaranteed Rural Housing program

 

Yes, you do need a down payment if you are anyone else.

 

Second... "how much down payment do I need?"

 

The next best option for a low down payment, is an FHA loan, which only requires a down payment of 3.5% of the sale price. This is a fan-favorite for first time homebuyers.

Conventional Loans are available with as low as 3% down, but require higher credit scores than FHA loans.
 

 

Third... "how much do I need to save?"

This depends on how much your home will cost, and what kind of loan you would like.

A good place to start is the How Much Can I Borrow Calculator on the Mortgage First Corp website.

Next, learn more about different loan types and their down payment requirements for each.

Keep in mind, there are also closing costs involved in a home purchase transaction in addition to the down payment. In some cases, you can structure a transaction where the seller pays all the closing costs--but this isn't necessarily something you can count on.




As a rule of thumb, have some additional savings as padding for things like: moving costs, inspections, home improvements, home furnishings, and money for pizza and beer for your friends that help you move ;)