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  • Writer's pictureJoseph Gunerman

How Much Do I Need To Put Down to Buy?

This is such an important read as it addresses one of the BIGGEST myths in all of real estate. You DO NOT need to put 20% down to buy a house. You need just 3% down to receive a conventional loan. I repeat... you do not need 20% down, and with as little as 3% you can get the most favorable loan in real estate.

If you're looking for a conventional 30 year fixed mortgage, the lender will require you to put 3% down and then pay for an additional 2.5-3% in closing costs. That means 6% of the sales price is essentially the threshold to become a home owner without using any income based programs for assistance. A great target number that I give clients is that if you can have 10% of the sale price in savings, that is more than enough to be a purchaser. How did I arrive at 10%? If you put 5% down on the house, I can help you avoid PMI or Private Mortgage Insurance (see previous article to learn how!), which will be a huge savings in your monthly payment. Then you have an additional 2-3% for closing costs, and then you're left with some savings left over in your rainy day fund.

In fact, most first time buyers nationwide put down between 5-7% when they purchased a home. Very few buyers in general put 20% down on their home, and even those buying for the 2nd or 3rd time often put down between 10-15%. One additional program that I work with all of the time that helps first time buyers is one of my preferred lenders gives a $7500 grant towards closing costs for qualifying buyers who make less than $109,000 per year. 4 of my first time buyers this year have taken advantage of the program and there is no penalty in terms of interest rate or closing schedule. With this program, you can actually buy your first home with as little as just 3% total out of your pocket, allowing you to become a home owner way earlier than expected!

If you'd like to talk more about this program, or whether you should be buying instead of renting next year, please send me a message. Helping first time home buyers is a huge passion of mine and I would love to help you quit renting and start building towards your future!

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