HOW MUCH DOWN PAYMENT DO YOU NEED TO BUY A HOME?

How much money do you need as a down payment if you’re thinking about buying a home? A recent survey of prospective homebuyers found that about 87% of them believed they needed to have a 10% down payment to purchase a home, but the truth is far different.

D. Shane Whitteker is the owner and chief broker at State College based Principle Home Mortgage. He works with potential home buyers to help them navigate the myriad of mortgage programs available.

“One of the biggest misconceptions is about how much down payment you’ll need as a first-time home buyer. That 10% down figure is simply not accurate - many loan programs allow for a significantly lower down payment.”

Here is a breakdown based on program:

VA 0% down
FHA 3.5% down
Conventional (Fannie or Freddie) as low as 1% down
USDA 0% down

Whitteker stresses that the down payment is only part of the equation.

“We must keep in mind that down payment and closing costs are two separate things,” Whitteker says. “Closing costs are a cost above and beyond the down payment.”

Don’t stress about closing costs too much though, as Whitteker says all of the aforementioned programs can help there too.

“Fortunately all of these loan types allow for some seller assistance towards closing costs,” Whitteker says. “This means the seller can pay some or all of your closing costs depending on the type of mortgage program.”

Whittaker says that seller assistance is based off of a percentage of the sales price.

“So, if you are buying a house for $200,000 and you are using VA financing you can get the seller to pay up to 4% - $8,000 - of the sales price as seller assistance.”

According to Whitteker, FHA and USDA allow for 6% of the purchase price to be applied as seller assist towards closing costs.

“This is a sufficient amount to cover all closing costs on most mortgages but it does depend on the lender and the costs,” Whitteker says.

The VA program allows for a 4% seller assist, so depending on the sales price, the borrower may need to bring a small amount to cover closing costs.

Conventional loans allow a maximum of 3% in seller assistance towards closing cost when the down payment is less than 10%, potentially requiring more money out of pocket.

“This is great information for first time home buyers to have,” Whitteker says. “Understanding how much money is necessary for down payment and closing costs is important to ensure your home buying dream becomes a reality.”

Contact State College based Principle Home Mortgage and start to plan for your future as a homeowner today!