For most people, the down payment for a new home purchase is one the biggest financial challenges. This is especially true if you don’t have a high-paying job or enough cash reserves. When it comes to putting money down, bigger is better, so you can qualify for lower rates and avoid private mortgage insurance (PMI).
Salt Lake City mortgage company, Altius Mortgage Group, shares a few ways to get a down payment:
Many buyers often save money by lowering expenses or making a few sacrifices like getting another job or a tiny apartment when they are renting. While you can get a loan with little to no down payment, it is advisable to put a substantial than paying nothing.
If you receive gifts from a friend or a family member, you have to get a written statement that the person giving you the present has no obligation toward or financial interest in the house. You can make a down payment (less than or more than 20%) from a gift or use it along with your savings.
Money from the sale of your home
If you have an existing home that you plan to sell before buying a new one, you can use proceeds to make a down payment. It is also easier to get a home loan if you sell your home first so that you won’t have two mortgages in your plate.
Many state and local governments provide down payment help to some homebuyers. There are also a non-profit organizations and community that offer assistance if you’re struggling to make a down payment.
If You Don’t Have 20% to Put Upfront
When financing a home with a conventional loan and you pay less than 20% upfront, you will need to pay private mortgage insurance (PMI). This covers the bank or the lender if you default or stop paying the loan. When you have paid sufficient principal to own more than 20% of the property, you will be able to drop PMI.
Down payment is an important part of a home purchase. If you have enough resources pay 20%, do so. If this amount seems a little too much, you may want to save first or explore other loan options available for you.