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Mortgage Guide

How to get a home loan

Down payment: How much do you have to put down?


One of the biggest decisions you have to make in buying your home is how much to pay on your down payment. The down payment is a percentage of the house’s price that you need to pay upfront.

Consider it as your initial investment. And how much you put down will determine important factors in your mortgage:  

  • interest rate
  • loan options
  • additional fees

What you have to remember is that the higher your down payment, the lower your interest rate will be. On the other hand, the lower your down payment, the higher your interest rate will be. And interest rates affect your monthly mortgage.

So what are your down payment options?

You can put down up to 20% of the home price. This will give you the best interest rates and a lower monthly mortgage payment.

But, yes, 20% is a lot of money. You don’t want to spend all your savings, do you? Another option is for you to pay between 5% to 19% of the home price. Because you put down a lower amount, you pay a higher interest rate. You will also be required to purchase a private mortgage insurance.  All of these will increase your monthly mortgage payment.

But what if you can only pay less than 5% of the home price? Actually, what if I don’t have cash for the down payment at all?

There are different loan programs that offer you low down payment options. There is the FHA loan program that accepts downpayment for as low as 3.5%. There is also the USDA loan program that offer 0% down payment options. Finally, there is the VA loan program for qualified veterans.

Pro tip: Your credit score, your property’s location, the type of house you want to purchase, and the home value may also affect your down payment.

When choosing a down payment option that’s best for you, you have to consider your financial circumstances, your financial goals, and how long do you plan to stay in your home. And before you decide, be sure to closely compare interest rates, fees, and monthly payment.

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