The average down payment on a house purchase is around 5.3% of the purchase price. Is this less than you thought it would be?
Many people think you need a lot more than this, but you might not.
If you want to buy a house, you might wonder how much you should put as your mortgage down payment.
Here is a guide to help you determine the right amount to put down when buying a house.
The Purpose of a Down Payment
When getting a mortgage loan, a lender must review various aspects of your financial state before approving the loan. They look at your income, debts, and credit score, as these things reveal your financial status.
Your down payment amount is another factor the lender looks at. When you put money down when getting a home loan, it lowers the risk the lender assumes when issuing you a loan.
Putting money down also reduces the amount of money you must borrow to purchase a home. As a result, your down payment lowers your mortgage balance and monthly payments.
When you apply for a home loan, the lender will ask you how much you can put down. The answer can affect your ability to get the loan.
The Benefits of a Higher Mortgage Down Payment
You can use a down payment calculator to determine how much you should put down, but ultimately it’s up to you and the lender’s requirements. Putting more money down offers some key benefits, though.
One benefit of putting money down is it improves your odds of getting approved for the loan. The second benefit is that it might help you qualify for a lower interest rate.
Putting a larger down payment on your home purchase can also help you avoid paying extra fees, such as private mortgage insurance.
The Amount Depends on the Loan Program You Need
Finally, you should know that you can choose from many loan programs when getting a mortgage loan, and each loan program has different down payment requirements.
For example, you might qualify for a VA loan with only 3.5% down. You might be able to get an FHA loan with 0% down. If you want to get a conventional loan, you might need 20% down.
Many people decide which loan program to use by considering the down payment requirements. If you are not familiar with the down payment requirements, you can get more information here.
In addition to learning the down payment requirements, you might want to consider the other criteria required for getting approved.
For example, what credit scores do you need for each loan program? Do you need a specific debt-to-income ratio to qualify? These are good questions to ask when getting a loan.
Save Up to Prepare for Buying a House
If you want to purchase a house, putting a mortgage down payment on the purchase is vital. You don’t need a huge down payment to get a loan, but a higher down payment helps.
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