Many people are saying just that. I realize it’s difficult to save up that much money, but people have been ingrained with the idea that they need a 20% down payment.
Well I’m here to tell you that you don’t need 20%. Here are a few options.
If you are a veteran, you may qualify for Veterans Administration benefits. What are those benefits? Well the biggest one that I’m thinking of right now is that you might be able to purchase a home and not have to make any down payment. You may even be able to get your closing costs paid by the seller. They will probably do that, but that amount will be added to your mortgage. But that’s a small price to pay in order to get into a home of your own.
Next we have a mortgage which is guaranteed by FHA, the Federal Housing Authority. With an FHA backed mortgage you can purchase a home with as little as 3.5% down. Along with the principal amount of the mortgage, you will pay an upfront fee for purchasing, you will also play a monthly insurance against default. This insurance payment will stay on your monthly payments until the mortgage is fully paid off. If you wish to put down more than 3.5%, by all means go for it. All single family detached homes are eligible for FHA Financing, and some, but not all attached homes are.
An overlooked way of buying a home with less than 20% down is a conventional mortgage with private mortgage insurance. The insurance is to protect the lender in case of the buyer defaulting on the loan. With this plan you can purchase a home with as little as 3% down payment. But most people will put down at least 5%. That allows them to pay a lesser rate for the private mortgage insurance. With this plan you can cancel the insurance once you meet the 20% equity mark. There are two ways to do it. First, making payments on the mortgage will bring down the balance of the mortgage. The other way is to wait for the value of the home to rise to where you now have 20% equity. Most people do this with a combination of the two methods.
So if you’re looking to buy home anywhere in the future, you should do it now. Why wait? Interest rates are still low, but they are beginning to rise. And home prices are still rising, and are projected to rise probably another 5% over the next 12 months.. So why wait?
Contact your Realtor, that would be us, Bunny and Art Reiman by calling 732-598-7700. And begin your search for a new home.