For a first-time homebuyer, a mortgage down payment can seem like the most difficult part of purchasing a home. Many first-time homebuyers have less savings to put toward a down payment or have debt from student loans or credit cards. As your Fairway mortgage planner, I am here to help you through every step of purchasing your first home. I look forward to demystifying the down payment process and helping you secure your new home.
Let’s start with the basics: What is a down payment? If you are unable to pay for a house in cash, a mortgage company provides financing in the form of money you borrow from a lender. The down payment is the initial payment made on the property, while the balance of the home price is financed. For example, if you purchase a home for $100,000 and borrow $90,000 (90%), you would put a $10,000 (10%) down payment on the house.
As a homebuyer, the size of your down payment is up to you. Many programs that allow for a lower down payment — or, in some cases, no down payment or down payment assistance — are available to first-time homebuyers. Additionally, you can use “gifted funds” for your down payment. Gifted funds are funds given to you by your parents or another eligible relative. I am happy to tell you more about the guidelines for this type of down payment.
Depending on which loan program you choose, if your down payment for a home is less than 20%, many lenders require that you purchase private mortgage insurance – known as PMI. As your mortgage planner, I can be a valuable resource for analyzing your finances and helping you decide how much home you can afford as well as how much money you should put down.
If you have not already started saving for a down payment, follow these tips.
I would love to talk with you soon about purchasing your first home. Call me today to learn more.