Buying a home is a process, but many new younger adults are taking the steps to become a homeowner. Now, is a great time to own a house with plenty of houses on the market. Closing the deal is essential but securing the financing is a very important factor for buying a new home. The right down payment can help you secure your dream home. Deciding how you will finance your new home will mean assessing your options. However, it will also be determined by the price of the home that you choose. Find a house that you love at a great asking price that you can afford into the future.
Financing Options For Buying A New Home
According to the Home Buying Institute online, FHA loans are the most popular home buying options. In fact, it’s a preferred method for first-time home buyers. Why FHA loans? Often times, people prefer FHA loans because it requires a low down payment, helps buyers with less than perfect credit, and is one of the easiest ways to secure a loan. The Federal Housing Administration (FHA) takes buyers with a score as low as 550 and only 37 percent is required as a down payment.
If you’re considering a conventional mortgage, at least 20 percent is required. Plus, they require insurance on the loan in case you go into default. Private mortgage insurance (PMI) will cost you thousands each year. However, the higher down payment will allow you to quickly secure equity in your new home. You can also save money for a down payment, but it can be very time consuming. It will take 5-10 years to save money for a new home. Plus, you should remember to factor in those PMI payments. The lower your down payment, the higher your monthly mortgage will be.
The Dollar Amount For A Down Payment On A Home Based On A $350,000 Dollar Home
- FHA Loan: @ 5 percent down $10,500 down
- Conventional Loan: @ 20 percent down $70,000 down or more
- Personal Savings: @ 30 percent down $100,000 down or more
*All prices are subject to a 30 year pay off plan
You should always factor in your credit score before you buy a home. If you’re considering a loan, this is the only way to determine the actual down payment amount. Interest rates, mortgage points, taxes, and other debt are also a factor for your down payment on a home. Ask yourself, do you have enough money for a down payment on a home? Talk to a mortgage broker for more details on your down payment home options.