So whenever someone is purchasing a property, a bank is almost always going to require some sort of down-payment.
The amount of down-payment that’ll you’ll need to set aside is totally dependent upon which loan you are applying for, so let’s look at the three most common loans to see what their typical down-payment amounts are.
So the first type of loan we’ll look at is the FHA loan and with this loan, you’re going to have put down at least 3.5% of the purchase price of property. So if the purchase price is $100,000 for example, you’re minimum down-payment amount is going to be $3500, which is 3.5% of 100,000. Now for the FHA loan, there are what are called down-payment assistance programs, where you can actually come in with as little as .5% as a down-payment.
The other 3% of the down-payment is actually provided by the city or county, and that 3% amount will be a lien on your property for a certain period of years. The good thing about this is that, you’ll usually not be required to make any payments on this 3% loan, and it usually goes away by itself after about three years. However, keep in mind that down-payment assistance programs such as this are limited to only certain counties and there are income limits to these programs. In other words, if you make too much money, you probably won’t qualify for it.
The next type of loan we’ll look at is the conventional loan. Now with the conventional loan you have a lot of flexibility in terms of how much you’ll have to set aside for a down-payment. The minimum down-payment amount for a conventional loan is 3%. However you can put 5% down if you want, or 10% down, if you’re doing an 80/10/10 loan, or you can just put 20% down to avoid paying mortgage insurance.
The last loan well look at is the VA loan, and this is an awesome loan product for veterans which depending upon their eligibility, can allow them to get up to 100% financing. Which is another way of saying that there is no down-payment requirement. Keep in mind that this type of financing is intended for primary residences.
If you’re buying for the first time and you’re not totally sure which one of these might work best for you, then just shoot me a message and I’ll try to give you more specific advice for your situation.