Buying Your First Home: The Downpayment
First-time home buyers face more hurdles than repeat buyers.
A first-time home buyer may have less savings. He or she might have a collection of student loans and other large debts. Perhaps the buyers is just starting a career. And of course, first-timers have no buying experience.
New buyers may even be about to live on their own for the very first time.
First-Timers Buy One-Third Of Homes
According to the National Association of REALTORS®, first-time home buyers account for 1-in-3 homes sold nationwide. This is the lowest rate in close to 30 years.
Yet, with mortgage rates low and an abundance of low- and no-downpayment mortgagesavailable from mortgage lenders, there’s never been a simpler time to get approved for your very first home loan.
This post is the first of a four-part series meant to help first-time home buyers get approved for their first mortgage and become homeowners.
What Is A “Downpayment?”
If you can’r or don’t want to buy a house with cash, you need financing — a mortgage.
Sometimes, a bank will lend you the entire amount you need to buy a home. This is known as 100% financing.
However, most mortgages require some contribution from the borrower.
If you purchase a home for $100,000 and borrow $90,000 (90%), you would put $10,000 (10%) down on the house.
Choose Your Loan Amount
As a home buyer, the size of your downpayment is up to you.
You can put up twenty percent or more, or you can skip the downpayment altogether. Each choice has its benefits.
For example, when you put more money down, you borrow less money from your lender. That reduces your monthly mortgage payment.
You may also get access to lower mortgage rates.
When you make a small downpayment, you keep more cash in your savings account for life’s emergencies.
It also means that you can buy a home today instead of waiting 8 years to save for a downpayment.