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How Much Should I Put Down When Purchasing A Home?

When you're purchasing a home, there are a lot of things to consider. One of the biggest is how much money you should put down as a down payment.





How Much Should You Put Down?

There are a few different schools of thought on this. Some people believe that you should put down as much as possible, so that you have more equity in your home from the start. Others believe that you should put down the minimum amount required by your mortgage lender, so that you can keep more of your money in savings. The truth is, there is no right or wrong answer. It really depends on your individal circumstances, and goals.


When To Put 20% Down.

If you have the opportunity to make a large down payment on your home, it may be beneficial to do so. A larger down payment means that you will have more equity in your home from the start. This can be helpful if you ever need to sell your home or refinance your mortgage. Having more equity gives you more negotiating power and can help you get a better deal. Putting down a large sum of money can also help you avoid having to pay private mortgage insurance (PMI). This is an insurance policy that protects the lender in case you default on your loan. If you are able to put down at least 20% of the purchase price of your home, you can avoid having to pay PMI.


When It Makes Sense To Put The Minimum Down.

However, there are also advantages to putting down the minimum amount required by your mortgage lender. Doing so will allow you to keep more of your money in savings. This can be helpful if you ever face financial difficulties or unexpected expenses. It can also give you more flexibility when it comes to making other large purchases or investments.


Different Down Payment Options.

There are many different types of mortgage loans available to home buyers, and each has its own set of benefits and drawbacks. Choosing the right mortgage loan for you will depend on a number of factors, including your financial situation, your down payment, and your preferences.


Conventional Loan The most common type of mortgage loan is the conventional loan. There is some misunderstandings when it comes to conventional, and the biggest myth that I want to address is that these loans require a down payment of 20%. This couldn't be further from the truth. In fact Conventional loans offer first time home buyers the opportunity to purchase for as little as 3% down! Everytime after the minimum required is 5% which makes these loans affordable, and great for first time home buyers, and frequent investors alike.


FHA Loan

Another popular option for home buyers is the Federal Housing Administration (FHA) loan. FHA loans are designed to help first-time home buyers or those with low credit scores obtain financing. These loans require a smaller down payment than conventional loans (as little as 3.5%), but they also come with higher interest rates and stricter lending requirements.

VA Loan

Veterans and active duty military members may be eligible for a VA loan, which offers 100% financing and very favorable interest rates. These loans additionally have no mortgage insurance, and are backed by the Department Of Veteran Affairs.


USDA

USDA loans are another option for those looking to buy a home in a rural area; these loans offer 100% financing and low monthly mortgage payments.

JUMBO

These loans are for loan amount that fall outside of the conforming loan limit. These change year to year, and county to county. However the national conforming loan limit in 2022 is $647,200. The minimum downpayment on these loans will vary depending on the investor who is offering the product, however they usually start around 10% and up.


Conclusion.

The bottom line is that there is no right or wrong answer when it comes to how much you should put down on a home. It really depends on your individual circumstances and goals. If you have the opportunity to make a large down payment, it may be beneficial to do so. However, if you would like to keep more of your money in savings, putting down the minimum amount required by your mortgage lender may be a better option for you.


At the end of the day, there is no right or wrong answer when it comes to how much money you should put down on a home. It really depends on your individual situation and goals. By doing your research and speaking with a mortgage advisor, you can figure out what option is best for you.


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