Down payments: How much do I need to save?

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If you’re starting to apply for a home mortgage, one of the biggest questions you might have is how much do I need to put toward a down payment.

For starters, a down payment is a percentage of the sales price that a home buyer pays out of pocket.

I’d suggest aiming for anywhere from 5 to 20 percent down payment.

Putting down 20 percent is the best, but it’s not necessary. The benefit of putting down 20 percent is that it makes the loan to value less than 80 percent. With that, you will not be required to pay private mortgage insurance (PMI). However, you can put down as little as 5 percent and only have to pay the PMI for a few years.

If you can’t put down 5 to 20 percent for a conventional loan, there are other loan programs you could benefit from and these usually require a lower down payment amount or even no down payment at all.

For zero percent down payment programs, you have the options of either a Veterans Administration (VA) loan or USDA Rural Development loan.  If you’re not current or retired military or looking in a USDA area, then you’ll need to consider a Federal Housing Administration (FHA) loan.

An FHA loan can take as little as 3.5 percent down payment and has more flexible credit and income requirements. These loans also allow you to receive your down payment as a gift from a family member or qualified person. It’s more common than you might think. One out of every three loans has a gift on it.

The amount you choose on your down payment depends on a variety of factors including the price of the home and your income.

It’s always a good idea to talk to a lender, like myself, to look into all your options.Down payment

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