How Much Do You Really Need For A Down Payment?

Trying to decide if you're ready to buy a house at the Lake of the Ozarks? It should come as no surprise that finances are major factor most people in your situation have to consider. Your house is likely the largest purchase you will ever make in your life, and you have to be sure that you are ready!

 The down payment is often the biggest obstacle that prospective home buyers have to face, so it should come as no surprise that finding out how much they need for a down payment is a top priority for most buyers. Unfortunately, there is no magic answer that indicates how much your down payment will be, as down payments vary according to several different factors and different types of mortgage loans have different requirements. Here's a quick look at some of these various factors.

What Is The Down Payment?

First, let's start with a little background info on the down payment. Since the vast majority of people who purchase homes are unable to do so without a loan, they apply for mortgage loans to help them with the process. The down payment is the money that the buyers provide upfront to put toward the purchase of the home, which lowers the required loan amount. For example, if you're buying a house for $200,000 and you put $50,000 down, you will only need a loan for $150,000.

For the lender, the down payment is assurance that you are serious about the purchase and gives them reason to believe that you will pay back the mortgage loan as agreed. For the buyer, the down payment is money that they won't have to pay back with interest at a later date.

What Is The Standard Down Payment Amount?

Traditionally, almost every conventional home loan required a 20% down payment. This means that if you were buying the same house mentioned above for $200,000, your required down payment would be $40,000. Depending on the price of your new home, then, 20% can be a substantial amount. While there are certainly still mortgage loans available that require 20% down, new loans with lower down payments are becoming increasingly popular.

What Is The Modern Down Payment Amount?

As the homeownership rate continues to rise, most lending companies are trying to make it easier and more affordable for people to buy their own homes. Loans requiring 10% down have become increasingly popular, and we are starting to see conventional loan opportunities advertising 5% down and even as little as 3% down. If you're buying the aforementioned home for $200,000 and only have to put 3% down, you will only have to provide $6,000 upfront.

Keep in mind, however, that if you provide less than a 20% down payment, you may be required to pay for PMI (Private Mortgage Insurance) until you have paid off 20% of the home's total price.

Is There Ever A Time When You Don't Have To Provide A Down Payment?

Actually, there is. Some unconventional loans require 0% down - that is, you can finance the total amount of the home. In some cases, you may even be able to include some of the closing costs into the total loan amount. The two types of loans that offer 0% down options are VA Loans and USDA Loans.

VA Loans are only available to active duty personnel, retired veterans, or (in some cases) their surviving spouses. USDA Loans are only available to individuals who meet "low income" requirements and whose desired homes are zoned in a "rural" county (Miller, Morgan, and Camden County qualify). See our earlier blog to learn more about USDA loans.

Happy House Hunting!
If you haven't already realized it, buying a house is more affordable than you may think! If you're ready to look at different homes for sale around the Lake of the Ozarks, give our team of experienced real estate agents a call. We would be happy to show you around!
Stay connected with Gattermeir Davidson Real Estate, LLC!

2011 REALTOR Salesperson of the Year
Missouri Association of Realtors

Gattermeir Davidson Real Estate, LLC
752 Bagnell Dam Blvd., Suite A
Lake Ozark, MO 65049

Office | 573.365.1555
Fax | 573.365.1766
Location: Lake Ozark, MO 65049, USA

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