The process to buy a home may seem daunting, especially to first-time homebuyers. There’s one step of the process that seems to cause the most concern of all: We’re talking down payments.
When it comes to down payments, one size does not fit all. In fact, it can mean vastly different things for different people in tremendously different situations.
While down payments can seem scary, this fear is often premature. Down payments are surrounded by a multitude of myths, making the process seem much more difficult to navigate than it is. Luckily, we’ve taken the time to debunk some of the common misconceptions.
Myth #1: You have to put a minimum of 20% down.
Long gone are the days of needing a 20% down payment. In today’s market, there are a variety of loan options that require low or no down payment options.
Depending on your situation, you could qualify for low down payment programs. Some programs include the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA).
Other options include down payment assistance and low-to-moderate-income programs. You can learn more about your options here, or contact an Evergreen Home Loans loan officer to see if you qualify.
Myth #2: The larger the down payment, the better.
Though it is true that larger down payments can reduce the cost of your loan, this may not be a viable option for everyone.
It is important to consider and discuss your current financial situation with your loan officer who can advise you on the right size down payment. They can help you build out a plan on how much you would like to put down initially and how much you can afford to pay each month. It’s important to note, you should always factor in additional moving costs and incidental spending when considering your down payment options.
Myth #3: The down payment is the only cost due at closing time.
It’s a good idea to budget extra money as a buffer when planning your down payment. When it’s time to close, you may also be responsible for additional closing costs, which could impact the initial amount needed to close.
A general rule of thumb for estimating closing costs is to calculate 2-5% of the average home price in the neighborhood in which you’re looking to purchase. These costs can vary depending on the type of loan you’ve chosen and the property you intend to purchase. Our team of loan officers can help you factor these additional costs into your budget from the start, so they don’t catch you by surprise later on.
Learn more about closing costs here, or contact one of Evergreen’s local home loan experts.
Securing your down payment is one of the most important steps in purchasing your dream home at a price you can afford. Contact a home loan officer today to learn more about the home buying process.