Thinking of buying, or know someone who is? The first step is to save up for a down payment. Here are some answers to some common questions about down payments.
How much down payment do I need? To qualify for a Federal Housing Administration (FHA)-insured mortgage, the smallest down payment acceptable is 3.5%. However, down payment requirements for some first-time homebuyer programs backed by Fannie Mae and Freddie Mac can be as low as 3%. Both of these low down payment options require mortgage insurance, which take the form of monthly payments tacked on to your mortgage payment.
The minimum down payment needed to avoid extra fees or payments is equal to 20% of your home purchase price. In other words, if you want to buy a $400,000 home, you’ll need an $80,000 down payment. That leaves you with a $320,000 mortgage.
Are there any tricks for saving up for a down payment? Yes! The best thing you can do to ensure down payment saving success is to make a goal and a strategy to meet it.
Set up a savings account: Create an account separate from your emergency fund and set up a direct deposit. The account can be a special saving instrument like a CD or a bond fund, which pay higher interest rates and require waiting a set amount of time before withdrawing the funds. This ensures you won’t be tempted to draw on your down payment savings for other expenses.
Convert new revenue streams: Take a part-time job and commit the extra income solely to your house fund. Or, the next time you receive a raise at work continue to live off your old salary and send that extra money straight into your savings account.
Reduce extra expenses: Calculate how much money you spend on a certain luxury item (i.e. trips to Starbucks or nights out) and cut back, redirecting that money into savings. Or, consider downsizing your car to free up more cash each month. Even better, do both!
Need help navigating down payments and mortgages? Call, text or email me for assistance on getting the best terms.
At Exit Realty of the South, we are committed to providing you with up-to-date information, comprehensive resources and the highest possible level of customer service in order to meet or exceed your real estate goals and objectives. Guided by honesty and integrity as a professional standard throughout the company, we are devoted to your total satisfaction as the benchmark of our success. The recipe for our success is an extensive support team that is second-to-none and passionate real estate professionals who invest numerous hours of continuing education to remain on top of their field.
Above and beyond having the desire, knowledge and ability to manage a real estate transaction, we employ innovative tools and systems that allow us to be most effective and efficient in serving you. From our computers to web-based real estate software and many other innovative techniques, we are driven to stay at the leading edge of technology to better serve you.
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