How Much Down Payment do I Really Need?

How Much Down Payment Do I REALLY Need?

One of the biggest concerns non-homeowners voice is the lack of a "big enough" down payment.  While down payment, credit score, employment status and past bankruptcies/short sales/foreclosures absolutely DO matter, the required down payment may be less of an issue than you think or expect.

Many people think that theyt must save 20% of the purchase price before they can buy a home.  In reality, Buyers can acquire a home in the Louisville, KY market with as little as $0 down.

Here are a few "particulars":

If you're a veteran with a clean discharge history, the VA will guarantee your loan with no money down, and even better, with no Private Mortgage Insurance (PMI) premium.  For vets who are first-time Buyers, this is usually the lowest cost loan and is a "home run" for you!  The same "deal" is available to Buyers who purchase in an area where USDA Rural Housing incentives are offered.

If you decide to use an FHA-backed loan, you will need 3.5% of the purchase price.  This sounds good, but you must also pay 2+% when you take the loan (which is usually rolled into your loan balance), PLUS over 1.5% of the loan balance as "PMI" each year, as long as you have the loan.  Thsi used to drop off when your balance dropped under 80% of the home's current value -- but not any more.

Conventional Loans can be written with as little as 5% down at purchase.  Unless you put down 20%, you will still pay PMI until your balance is less than 20% of the home's current value, but then it stops.

Bottom line -- there are downpayment assistance programs for families with limited funds, 3%-down No PMI loans (with slightly higher interest rates), Kentucky Housing Partners loans, etc., etc.  Don't assume anything.  Just talk to a lender to see what options are available to you if you're thinking of buying a home (or a different home).  If you need recommendations, feel free to give us a call or fill out the contact form below.  We're here to help!

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