The down payment is the part of the purchase price the buyer pays in cash and does not finance with a mortgage. Down payments are a percentage of the home’s selling price. For example, a 20% down payment on a $100,000 home is $20,000. Placing downpayments helps protect buyers in a fluctuating housing market, creates equity, improves your credit score, and often lowers your interest rate. A downpayment also shows lenders that you are serious about the purchase. As an added bonus, whatever you put down is money you won’t be paying interest on. While it is not also required to put in a downpayment, we strongly recommend you consider your options.
The type of mortgage determines the minimum down payment needed, usually ranging from 0% to 20%. Your mortgage loan officer will let you know what downpayment percentage is required of you, and how much you should put down in order to save the most money in the long run.
Options for Veterans
Veterans Administration (VA) loans are designed to help service people and veterans obtain financing at very reasonable rates and offer financing up to 100% of the home’s value. The Federal Housing Administration (FHA) was created to help middle- to lower-income buyers secure home loans. The FHA doesn’t actually lend the money; instead, it insures the loan. The FHA requires down payments as low as 3.5%. There are guidelines and the buyer’s credit is important to meeting these requirements. Although you may not have to put a full 20% down to buy a home, it is wise to put down as much as possible.