The down payment is often a big hurdle for aspiring homeowners. In this blog, we'll explore effective strategies to help you save up for that all-important down payment and achieve your homeownership goals.
- What is the down payment?- The down payment in a real estate transaction is a lump some of money that buyers bring to the closing table. This amount is always a percentage of the sales price that can range from 3% to 20% or more. The down payment amount depends on the type of mortgage you choose, the type of property (primary or secondary), and your financial situation.
- What difference does a large or small downpayment make?- A larger down payment on a property can get you into a more expensive property or a lower interest rate, which means lower monthly payments! A larger down payment generally means you’re a less risky borrower, and a less risky borrower means a lower interest rate. For some, saving 20% of the purchase price can take years. Smaller down payments have benefits such as allowing homeownership sooner by requiring less cash. Smaller down payments can also allow you to have funds for repairs and renovations, an emergency fund, and other ventures.
- What if you can’t come up with a large downpayment?- If a large payment isn’t feasible for you, homeownership is STILL POSSIBLE! 20% down is no longer the industry standard, and the average down payment paid for mortgage is around 6%. Over the years, the mortgage industry has changed to make homeownership more accessible. It’s now possible to get a mortgage for as little as 3% down and some loans like veteran affairs loans or USDA loans require no money down at all.
To save up for your future down payment, focus on cutting out unnecessary spending even if that means refraining from small expenses like Uber Eats, outside coffee, cutting back on streaming services, etc. You’d be surprised at how small expenses add up! Refrain from making large purchases that are lower on the totem pole of importance. Getting into your home is more important than that flat screen! Make it a priority to set aside a reasonable percentage of your monthly income. Before you know it, you’ll reach your goal.
On top of financially tuning yourself up, there are down payment assistance programs that you may qualify for depending you your financial need and location. You can potentially walk out of closing with ZERO DOWN in some instances! Ask your agent (me) how you can get into a home today!
To understand your buying power and get pre-approved, follow this link to Sean Imadiyi: Price Mortgage
