A number of key decisions should be made when getting a home loan and the amount of down payment is one of the most crucial one. In determining the size of down payment you need to put in, there are many things to think about. As a whole, when you make a large down payment, your loan amount will be lower thus giving you a lower monthly payment. Furthermore, your down payment size will also be affected by the mortgage program you go for and your current available cash.
Conventional lending programs have three tiers of DP choices. The FHA loan allows a low DP of 3.5% of the buying price. Fannie Mae and Freddie Mac requires at least 5% of the price. Conventional loans on the other hand needs a 20% DP to steer clear from a private mortgage insurance as this kind of insurance can add more than a hundred dollars to the monthly payments. If a borrower drops 20% down payment, the risk of the lender lowers, thus removing the need for a private mortgage insurance.
Additionally, buyer assistance programs could be given to qualified borrowers. These programs can reduce your DP amount to as little as $1k. Still, these programs vary from state to state. But generally, mortgage qualifications aren't relaxed and its eligibility has a broad scope. You may also be required to get loan counselling from a qualified medium.
Also, there are subcategories to available assistance and this involves specific employments such as teachers, policemen, and fire fighters. Veterans also have different down payment benefits, as the Veterans Administration offers a program that allows veterans to buy a home with no down payment and 100% financing. Still, the qualifications also vary depending on home price, previous programs used, and time served.
Overall, down payment amount differs from your loan type, available assistance, and your desire to purchase your prospect property. If there are multiple bids on a home, putting in a bigger DP could let you stand out among other buyers. You should also know that the down payment you have to drop can be affected by how "low risk" of a buyer you are. If you prove to the seller that you are financially stable and financially responsible, you can buy a property with a lower down payment. This is why keeping a good credit score is also important in determining how high or how low you can go in paying for a home down payment.
