A lot of people ask me, "How much money is needed for a down payment?" There are a lot of misconceptions about down payments. Today, we'll go over the down payment options available to buyers who use FHA and conventional loans, since that's how most buyers finance their home purchase.
The minimum down payment for an FHA loan is 3.5% down. If you were to buy a $200,000 home, that means you would need to put $7,000 down.
For conventional loans, the minimum is technically 5% down, but if you meet additional criteria, you'll need as little as 3% down. If you were to buy a $200,000 home, depending on the criteria, you could owe between $6,000 and $10,000 down.
Another thing buyers should keep in mind is closing costs. Both FHA and conventional loans offer a seller's assist, where the seller would offer a credit to the buyer to offset all or some of those closing costs.
Many people say that you need to put 20% down and if you don't, you have to get mortgage insurance, which is a waste of money. Actually, there are many different ways to deal with mortgage insurance. You can build it into the rate and pay a slightly higher interest rate over the life of the loan, pay a lump sum up front, or make a monthly mortgage insurance payment that goes away once you have a certain amount of equity in the property.
The main thing you need to keep in mind is that it does not take as much money as people think to buy a home. If you have any questions, give my team a call or send us an email. We would be happy to help you!
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