How much of a down payment do I need?
The short answer is that you can get a conventional mortgage with as little as 3% down, an FHA loan with 3.5% down, and a VA or USDA loan with no money down at all.
However, with a conventional or FHA loan, you’ll have to pay private mortgage insurance, aka PMI, if your down payment is less than 20% of the home’s sale price.
Those payments won’t be a permanent fixture in your monthly payments, however. Once the loan-to-value ratio on your mortgage falls to 80%, you can ask your lender to drop them. And even without your request, lenders are required to cancel PMI when the loan-to-value ratio drops to 78%.
How much should you save for a down payment?
We recommend putting at least 10% down on a home, but 20% is even better because you won’t have to pay private mortgage insurance (PMI).
PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage.
Saving a big down payment takes hard work and patience, but it’s worth it. Here’s why:
- You’ll have built-in equity when you move into your home.
- You can finance less, which means you’ll have a lower monthly payment.
On the flip side, if you buy a home with little to no down payment and the market dips, you could be stuck until home values recover.If the goal is to pay off your home quickly, why not get a head start with a big down payment? Now that’s a good game plan!
What are closing costs, and how much should I expect them to be?
The term “closing costs” refer to all of the charges you’ll need to pay before your loan is completed.
This can include origination fees, title insurance, prepaid escrows, and more. Closing costs can vary significantly, but generally, expect to pay around 2% to 3% of the home’s price in closing costs.
What are discount points, and should I pay them?
Discount points are money that you pay up front on your mortgage in exchange for a lower interest rate.
One “point” is equal to 1% of the loan amount, so on a $200,000 mortgage, one discount point would be $2,000.
Discount points are tax-deductible, and mathematically, if the interest savings over the life of the loan is greater than the points paid, it can be worth it.
A mortgage calculator can help you determine whether discount points are a good idea by comparing the effect of various interest rates on your mortgage.
Most people are intimidated by the mortgage process. This section answer questions like:
- How to Qualify
- Credit Requirements
There are many different types and terms for loans. This section covers the most popular options.
- Fixed Rate or Adjustable?
- 15 Year or 30 Year?
- Mortgage Points
How much does the home buying process cost? This section covers information like:
- Down Payment
- Closing Costs
- How Much to Save
How much can you expect to pay on your mortgage? This section covers loan management.
- How Much Can I Afford?
- Mortgage Payments
- Do Payments Change?
How long does the whole process take? This page details answers to questions like:
- Average Timeline
- What happens At Closing
- Why It Takes Time
The best way to get started is to fill out a pre qualification form, that way we can help you 1 on 1 for your situation.