Some people get worried about the down payment on a home.  They imagine it’s some huge, impossible dollar amount that will take them years to save up for.  It might even prevent them from purchasing a home altogether.

Truth is, a home’s down payment isn’t as frightening as people often make it out to be.  In special circumstances, you might not have to make a down payment at all, though generally, you should expect to put something down.  There’s a good chance that amount isn’t as much as you think it will be.

Like so many things with home buying, there are a lot of different options available out there. 

Defining the Down Payment

Just so we’re on the same page, the down payment is a cash amount you pay out of pocket when purchasing a home.  The remaining amount of the home’s cost will be financed through your mortgage.

The size of the down payment ultimately affects the size of your monthly mortgage payments and can also factor into interests and loan types available to you.

Down payments are typically required as they provide the purchaser with equity in their home.  This acts as an incentive to make house payments and not default.

The Recommended Amount for a Down Payment

The traditional down payment amount is 20% of the home cost.  This is a fairly large sum of money, and for people who don’t currently own a home, it can be incredibly difficult to put together that kind of money.

That’s why there are a number of low down payment mortgage options available, particularly for first time home owners.  Even if you’ve purchased a home before, you can get a lower down payment amount with an FHA loan.

Don’t Forget About Closing Costs and Initial Repairs

When figuring out a down payment, new homeowners often base it off the total amount of liquid assets they have on hand.  However, there are other costs you need to keep in mind when determining how big of a down payment you can make.

Closing costs are also owed with the down payment and are typically between 2 to 5 percent of the home’s price. 

It’s also likely you’ll make to make some updates right away when you move in, whether it’s painting or re-carpeting or landscaping.  Keep these costs in mind as well when you’re planning a down payment.

How Much Will My Down Payment Cost?

Figuring out your down payment depends on a lot of variables:

  •        House costs
  •        Income
  •        Credit Score
  •        How Much You Can Afford in Monthly Payments

Ultimately, there’s room for flexibility so that you can have a down payment and a mortgage that works for you.  The best way to start getting answers and learn your options is to talk to a realtor.  If you’re looking at San Diego homes for sale, you can contact us here at Metro San Diego Realty.

We can’t wait to help you find your dream home.

Posted by Jason Coriano on
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