Are you planning on financing the purchase of a home? If so, like most homebuyers, you’re probably wondering how much of a down payment you’re going to need?
The answer to this question depends on the type of mortgage loan that you’re applying for because each mortgage loan has different down payment requirements.
Which Mortgage Loan Are You Going to Apply For?
VA Loan – If you’re an active or retired member of the United States Armed Forced, you most likely will be using a VA loan to finance the purchase of a home. This loan doesn’t require any money down and borrowers don’t have to worry about paying Private Mortgage Insurance (PMI).
FHA Loan – One of the most popular mortgage loans over the last 10 years has been an FHA loan. With this type of mortgage loan, a borrower only has to put down 3.5% if their credit score is 580. If the borrower's credit score is between 500 and 579 however, they will have to put down at least 10%.
Conventional Loan – The average conventional mortgage loan comes with a down payment requirement of at least 20%. If you decide to put down less than 20% with a conventional loan you will be required to pay Private Mortgage Insurance. The good news though is that once your home has 20% equity, the PMI can be removed.
Adjustable Rate Mortgage – With an ARM mortgage, the interest rate can change and this also means that your monthly mortgage payment can go up or down. When choosing this type of mortgage loan, it’s best to use caution and make sure that you will be able to afford your monthly payments should interest rates increase in the near future and your payments go up.
In total there are roughly eight mortgage loan options that you can choose from. Some of the other mortgage loan options on the market today include interest only, combo / piggyback, balloon, and jumbo.
What Type of Mortgage Payment Do You Want?
Even though you may be focused on the down payment that it takes to buy a home, another thing that you should also be focused on is your actual monthly mortgage payment.
Having an affordable monthly payment is one of the most important parts of buying a home because if you’re paying more money than expected for your monthly house payment this will only create financial stress.
The best way to verify how much cash out of pocket that you’re going to need to get the monthly payment that you want is to consult with a mortgage lender.
Contact the Fred Sed Group
To learn more about how much of a down payment you’re going to need when buying a home, or to view homes for sale across Southern California, contact the Fred Sed Group by calling us at (800) 921-9231 or connect with us online.