How much do I actually need to put down for a home purchase?
While saving up to buy a home with cash does seem the smartest financial move to make, cash buyers make up less than 12% of the home buying community. With the growing inflation costs, it seems more and more Americans are out of reach with that idea of the American dream.
How much do I actually need?
The idea of setting aside 20% down towards the principal of your home is rooted in tradition and the fear of PMI. Private mortgage insurance is a fee you pay when you cannot provide 20% upfront. This protects the lender in the event you cannot make your payment. The rate you pay depends on the amount put up front, for example, putting 3% down will have a higher fee than putting 10% down. Some people are completely put off by the idea of adding in an extra $100-300 to their mortgage payment, but for those of us who don’t have enough equity or cash stashed under the mattress, this is a great option to build up your own home investment and quit paying someone else’s mortgage with your rent.
How do I know what’s best for me?
Talk to a lender! Ask your agent if they have anyone to recommend. We all have a few lenders on standby that we can refer clients to depending on their situation. An actual, real life, lender is able to see your income, know your housing market, and recommend the best mortgage for you. They can even direct you to local programs that can work to your benefit, such as first time home buyer programs, down payment assistance grants, or other local programs that mesh well with your personal needs. Several years ago, my loan officer found a grant program that helped us cover most of our downpayment, and we actually wound up getting our earnest money back at the closing table! The lenders in your area can be a wealth of information that basic big lender online programs can’t always cover.
And as always, reach out if you have any questions. While I can’t always give you every mortgage answer, I can answer what I know, and refer you to someone if I don’t.
