Arlene Maloney: If you are in the market to buy a home youve probably started looking at your finances to see what you can afford. Almost all mortgage options require a down payment, the money you pay to make up the difference between the price of the home and the amount of the mortgage.
The amount of your down payment can influence what financing options and interest rates are available to you. The more you put down, the less youll have to borrow, so where do you start.
A common myth is that 20% is required for a down payment but thats not true. Some government sponsored loan such as FHA loans require as little as 3.
5% down or VA loans that offer a no-money down option. For conventional financing there are also low down payment programs that allow you to put down as little as 3% and the down payment may not have to come from your own funds or from a down payment assistance program. Check with your mortgage professional to see if you qualify for any of these options.
Gift funds are another way to obtain your down payment. Lenders may allow gift funds which must come from an acceptable source and are not expected to be repaid. An acceptable source is determined by the loan program or product you select. FHA and VA allow gift funds to be used towards the required down payment and closing costs.
Gift funds can also be used for conventional financing, but the requirements may differ. For instance, if you put down less that 20%, part of the money maybe a gift but some may have to come from your own funds. On the other hand, if you put down more than 20%, gift funds can be used for the full down payment.
You may choose to save all of the funds you need for your down payment. Start by figuring out how much you need to save; once youve got that goal pay yourself first, cut expenses, and track your spending; youll start to see the savings add-up in no time.
When it comes to securing a down payment to buy a home, knowing your options is a good way to get started, whichever option you choose youll be one step closer to reaching your homeownership goals.