Buying a Home for the First Time? What To Expect for Your Down Payment

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If you're considering buying a home for the first time, congratulations! You've made an excellent financial decision, and there's nothing like the feeling of owning your own home. When it comes to what you can expect for your down payment, there are many factors that will affect how much it could be. Let's dive in for a better understanding.

 

Determine How Much You Can Afford

If you're a first-time home buyer, the initial step toward determining what your down payment will be is figuring out how much you can afford in terms of monthly mortgage payment and overall home price. Many people use a home affordability calculator to help determine this, and it's a great tool to help you get started.

 

To use an affordability calculator, be prepared to enter information such as your annual income and monthly debts in your current income portfolio.

 

Optimize Your Credit Score

Once you've determined your affordable price range, be sure to check your current credit score. This is among the most important factors affecting what sort of mortgage deal you'll have access to, as a better credit score means lower down payment options and better interest rates on your loan.

 

If you have any credit issues that can be easily addressed or repaired, be sure to rectify them before beginning your mortgage application process.

 

Talk to Different Lenders

Now it's time to choose a lender. It's generally advisable to get pre-approved for a mortgage loan before you begin shopping for homes, as this will make the process go a lot smoother. In fact, it's common for sellers to prefer working with prospective homebuyers who already have pre-approved mortgages in place.

 

When selecting a lender, don't just select the first offer you get. Be sure to talk to multiple lenders to see all the options available to you. If you don't know of any, talk to your local real estate agent, as he or she can offer suggestions.

 

Mortgages With Low Down Payments

First-time buyers with good credit have multiple options for mortgage loans with low down payments. Among these, VA and USDA loans are available with 0% down payment. VA loans are backed by the Department of Veterans Affairs, and available to current and veteran military service members.

 

USDA loans are backed by the US Department of Agriculture and are available to low-income applicants in eligible rural areas. FHA, Fannie Mae, and Freddie Mac loans are also available to first-time homebuyers with as little as 3% to 3.5% down payment.

 

Conventional Loans for First-Time Homebuyers

If you don't qualify for any of the above-mentioned programs, don't worry. There are still many options available to you through conventional lenders, and with a good credit score, you should be able to find a home loan with as little as 3-5% down payment.

 

As you can see, the down payment for most first-time homebuyers can be very affordable, and you have many options to choose from. Now that you have a better sense of what your down payment might be, it's time to start shopping for your new home.