Do you really need 20% down to purchase a home?
Are you ready to buy a house? At one point or another, you’ve probably heard you need 20% for a down payment.
Surprise! You don’t. Depending on the loan program, you have options!
Yes, there’s more than one type of loan program! Some of the most popular programs are:
So, if 20% isn’t always required for your down payment, what are the other options?
Much less down. In fact, some loan programs require much, much lower down payments. Take the FHA Loan Program for example, qualified borrowers are only required to put down as little as 3.5%. Talk about awesome! (Even less for qualified first-time homebuyers!)
So, if you can’t reach your money savings goals or don’t want to wait any longer, you can apply for the FHA Loan Program here.
Let’s explore some benefits of a larger down payment:
Elimination of PMI
When a qualified borrower puts 20% or more down, it has the potential to eliminate PMI. This is also known as Private Mortgage Insurance: This is a type of insurance fee paid on top of the monthly mortgage amount to protect the lender if the borrower defaults on payments.
Lower Monthly Payment
Simply put: the more money paid up front, the less is owed.
Like any other payment, the more that is paid upfront means less the smaller the remaining balance is. This is important, especially when it comes to factoring in interest. The longer the life of the loan, the more you’ll pay in total in interest.
Shorten Life of Loan
When PMI is eliminated, it allows for a lower monthly mortgage payment. If you choose a 15-year mortgage loan, you might be able to get ahead of the game and pay off more each month than is required. Before you know it, you’ll be debt-free on your home and have money to put toward something fun, like vacation!
One thing that’s certain about life is that it changes. For example, you might find yourself in a more comfortable financial situation six or seven years after buying a home.
If so, it might be a great time to refinancing. Why?
Refinancing when your financial situation changes could adjust the monthly payment amount and eliminate PMI. How good does that sound?
Now that you’ve busted the mortgage myth of not having to put 20% down, you’re ready to plan for your homebuying journey!