One common question many home buyers have when they are in the process of buying a home is how much money they should put down.
The amount of money you should put down when purchasing a home should ideally be at least 20% of the homes purchase price.
Why Down Payment Is Important
Your down payment when purchasing a home is important since it will show your lender the commitment you have in buying a home plus it will also affect the amount of money you will need to borrow for your mortgage loan.
Let’s say you put down you want to buy a home which has an appraised value or purchase price of $200,000.
If your down payment is $40,000 you will need a mortgage loan of $160,000 to cover the purchase priceof $200,000 for the home.
A larger down payment also means a lower mortgage payment every month and you will be able to payoff your home sooner rather than in 30 years.
Private Mortgage Insurance
It’s not uncommon for some home buyers to not have the ability to put down 20% when buying a home.
In situations like this the buyer will be required to pay for Private Mortgage Insurance since their loan-to-value ratio will be greater than 20%.
When budgeting for buying a home it’s important to consider the long term cost of paying for Private Mortgage Insurance (PMI) if you’re not able to put down 20% since this will increase your monthly payment.
No Down Payment Mortgage Loans
Veterans, active members of the military can enjoy the benefit of a no down payment home loan thanks to the VA Loan.
It’s also possible for people who are serving in the military to receive a no down payment home loan through Navy Federal Credit Union too.
Home buyers who are not in the military and are searching for no down payment home loans may be able to qualify for a Department of Agriculture home loan and the cool thing is that this type of home loan isn’t just for people who live in rural areas.
To learn more about mortgage loans or to view the latest homes for sale across Orange County contact Fred Sed & Associates today by calling us at (949) 272-0125.