How much down-payment do I need?
What does your current situation have to do with buying a home? I am referring to several things. Your credit score. Debt to income ratio, the amount of money in savings, annual salary, and when you want or need to buy. These are the main factors to consider when buying a home. It will affect how much money you will need for a down payment and the percentage rate. Another thing to consider, do you want a move-in ready home or a fixer-upper that needs a few repairs? This decision can affect what type of loan you can get.
When considering a home loan, you need to think about the three main types of loans. VA, FHA, and Conventional loans. Each has specific things that set them apart. The majority of move-in ready homes can use all three types of loans. Homes needing much repair will likely only qualify for Conventional loans. If you are a veteran you can get a VA loan that does not require a down payment. If not, the typical FHA loan requires 3.5 percent down, and Conventional loans can be 3, 5, 10, or 20%. Please keep in mind, this is the basics. What does this mean? On a home purchase of $300,000, you will need a down payment of $10,500 for an FHA loan. A Conventional loan can be as low as 3%, requiring only $9,000.
Can it be different amounts for each type of loan? YES! An experienced loan officer can guide you through ALL the different options. I want you to get several things from this. Remembering that each loan type is different in its offerings. I discussed the type of home and standard down payments. Next to discuss is mortgage insurance. What is mortgage insurance? If you default on your loan, the mortgage insurance pays the mortgage company. An FHA loan has mortgage insurance for the lifetime of the loan that is tacked on to your monthly payment. A Conventional loan requires mortgage insurance until you have 20% equity. If you put 20 percent down then you won’t pay mortgage insurance.
Luckily you have us to guide us through this crazy ride.