If you were to ask the question, “how much should I save for a down payment?”, you will likely get a range of answers. Some may say, “20%” while others say, “you shouldn’t need much” but the real answer is, “it depends on what loan you want and qualify for”. Keep in mind, that the minimum down payment is just a minimum requirement; the more money you put down the less you have to borrow and will thereby lower your monthly mortgage payment.
We have found that many first-time homebuyers are drawn to the FHA (Federal Housing Administration) home loan because of its less stringent requirements than other programs such as the convention home loan; the FHA loan offers lower down payment and lower minimum credit score requirements. In fact, the FHA was created during the Great Depression, it encouraged banks to give home loans to low-medium income families, first time homebuyers or those with a low credit score to boost the economy. The FHA loan has remained attractive for first time homebuyers, currently the down payment requirement is 3.5% for the FHA loan. So, if you were purchasing a home for $100,000.00 the down payment requirement would be $3,500.00.
While the FHA loan program may be popular amongst first time homebuyers, it is not the only option for them! There are even home loans that require no down payment, you canlearn more about loan programs and the mortgage down payment requirement here. The best way to find out how much money you will need to put down, between the down payment and the closing costs is to have a conversation with your mortgage banker and determine your “out of pocket” expenses.