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Mortgage Consultant: How Much Should You Put Down on a House?
Deciding how much money to put down on a house is an important decision. A down payment is what you pay for a home purchase. It is the earnest money you deposit with your offer, and it shows the seller that you are serious about buying the home. The amount of your down payment can also affect your mortgage interest rate and monthly payments. So, how do you decide how much to put down? Read on for some helpful tips.
The Rule of 10%-20%
A conventional loan typically requires a minimum down payment of 3%. However, if your credit score is less than excellent, you may be required to put down 10%. FHA loans have a minimum down payment of 3.5% and VA loans have no minimum down payment requirement. For these loans, if you put down less than 20%, you will be required to pay private mortgage insurance (PMI). This is insurance that protects the lender in case you default on your loan. PMI can add several hundred dollars to your monthly mortgage payment, so it's important to factor this into your decision.
Another important consideration is your budget. How much can you afford to spend each month on your mortgage payment, property taxes, and homeowners insurance? You'll also need to have money set aside for repairs and maintenance. Once you've answered these questions, you'll have a better idea of how much money you can comfortably afford to put down on a house.
Down payments typically range from 3% to 20% of the purchase price of a home. For many people, coming up with this kind of cash can be difficult. If you don't have the money saved up, there are a few options available to you. You could take out a personal loan from a bank or credit union. You could also use a 401(k) loan or tap into your home equity if you have enough equity built up in your current home. Whatever route you decide to take, make sure you understand all the terms and conditions before taking out any loans.
Making the decision about how much to put down on a house is an important one. There are several factors to consider, including the type of loan you're getting, your budget, and your savings. Be sure to do your research before making any decisions so that you can make the best choice for yourself and your financial situation.