A first time home buyer may face many hurdles during the process. Such as student loans, lack of financial resources and lack of experience. As the financial resources are limited, most buyers have to take assistance from mortgage lenders and loan providers, and all these providers require you to make a down payment which ranges between 10-20%. But the question is – is this amount right? If not; what is the right ‘first time home buyer down payment amount’?
This first time home buyer guide will provide you all the answers, but let’s start from knowing what is a down payment.
How Much Down Payment For First Time Home Buyers Is Required To Buy a Home?
First time home buyers have vast range of mortgage programs to choose from and they provide different down payment ratios.
It leads towards the most asked fist time home buyer question, which is – how much down payment for first time home buyer is?
And the answer is: it depends on your financial condition. Higher the down payment, lower the mortgage installments. But the most famous ratio that goes around is between 10%-20% of the actual price.
Any amount of down payment which ranges between those percentages is acceptable. Moreover, anything goes beyond 20% is also acceptable.
However, if you are running tight on finances and your budget won’t allow you to make a big down payment, there are some other loan programs that provide loan on the lowest down payment rates possible.
Reading the following will help you understand how much down payment for first time home buyers is actually available.
- FHA Loans:
This loan program is considered to be the friendliest among first time home buyers. It provides loan for as low as 3.5% down payment, and majority of the first-time buyers use this program to complete their purchase.
- VA loans:
These loans provide 100% financing (zero down payment) and are only available for US military veterans. If you are a veteran, VA loan is the way to go.
- USDA loan:
Those looking for a home in rural/suburban area and have no ‘first time home buyer down payment amount,’ this loan program is the best option.
Just like VA loans, it also provides 100% financing option and zero down payment restrictions. Plus, it’s not just restricted to the military veterans, which makes it even easier to qualify.
- Conventional 97 Loans:
These loans are available for as low as 3% down payment. However, the maximum amount of loan can get through this program is $420,000.
- Down payment Assistant Programs:
Many first time home buyers do not have any idea that there are many Down Payment Assistance Programs (DPA) available too. These programs help to reduce the closing costs and monthly mortgage payment.
So, while going for a loan, ask your mortgage lenders if there are any DPAs available in your area? And he is very likely to find you the best DPA possible.
Making down payment is an essential part of buying home, and your ‘first time home buyer down payment amount’ depends on your financial condition. if its struggling, make a down payment that is around 3%. However, if you are financially strong, keep it between 10%-20% to reduce the mortgage installments and closing costs.