How much down payment do I need to purchase a new home? This question is often asked by prospective home-buyers who are finding ways to save for the big day when they can get pre-approved by a mortgage lender and start house hunting.
While saving for a home can be a huge hurdle for most first-time home buyers who are already paying rent, utilities, and other bills, many renters often wonder how much money they’ll even need to secure a home loan.
Here are a few simple ways to figure out how much of a down payment you need to save to secure a home loan:
How to Determine How Much of a Down Payment You Need for a Home Loan
1. Contact a Mortgage Lender
Many people wait until after they’ve saved a decent sized down payment to contact a mortgage lender. But, contacting a mortgage loan officer first is a great way to figure out what Down Payment Assistance Programs you may or may not qualify for.
They can also help determine which mortgage programs you may qualify for based on your income and credit. Different home loans have different minimum down payment percentage requirements, so it’s good to know which ones you meet the requirements for first.
2. Do the Math
As previously stated, different loan programs require different percentages be paid up front as a down payment. For example, an FHA loan requires as little as 3.5% of the purchase price for a down payment.
And a VA mortgage loan (for military veterans) typically requires 0% or no down payment, but still has minimum income and credit requirements.
Other traditional home mortgage loans may require a 20% down payment or PMI (private mortgage insurance), if the 20% down payment requirement isn’t met, to help minimize the risk to the lender.
Again, checking with a qualified mortgage lender in your area will give you a much better idea of down payment requirements.
3. Work on your Credit Score
Your credit score can have a big impact on what size of down payment a mortgage lender requires to secure a house loan. So, it is always a good idea to work on your FICO credit score.
The FICO score is the credit score that most mortgage loan lenders typically use to determine your interest rate, down payment amount, and general credit worthiness.
Many credit card companies and banks/credit unions will give you your FICO score for free, such as Discover Card. You can check with your credit card company or bank to see if they offer this service.
You can also figure out where to get your free FICO score from this article: Where to get your FICO score for free
Synopsis: How Much Down Payment Do I Need?
Whatever your mortgage loan down payment needs, Spectrum Realty & Property Management is here to help! We work with many great mortgage lenders and recommend Brian Arthur at Alliance Lending Services!
We also have great rental options, homes for sale in Utah listings, and property management services! With affordable home buying/selling, rentals, and property management options, give us a call or email to let us know how we can help you today!
Phone: 801.655.3700
Email: spectrumpm@gmail.com