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"How much of a down payment do I need to buy a house?"
"How much do I need to put down to avoid PMI?"
"What are some tips when saving for a down payment?"
When you buy a house, deciding how much you can put down is an important decision. Loan programs, interest rate and terms are all dependent on the amount you put down (usually 3%-20%). It is essential you discuss your options with your loan officer and determine how much you can afford to put down. The most important thing is to be realistic and understand what your limits are.
"How much of a down payment do I need to buy a house?"
Deciding this may require you to talk with your financial advisor and CPA. There are programs where you can put as little as 3% down (for now 100% financing is not an option in California). 5%, 10% and 20% are the most popular down payment programs. We suggest you talk with a financial advisor or CPA along with your loan officer to determine what amount is right for you. Ask your loan officer what are the differences in loan programs when you put 5% or 20% down.
"How much do I need to put down to avoid PMI?"
20% or obtain a mortgage with lender paid PMI. Lender paid PMI means you have no additional PMI payment as the lender makes the payment for you. Do they do this for free? No. If you do a lender paid PMI program you will pay a higher interest rate then if you paid the PMI yourself.
"What are some tips when saving for a down payment?"
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Save
Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.
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Borrow the down payment from your retirement plan
Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.
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Move
You may be able to save additional funds if you can move into less expensive housing.
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Reduce other higher interest rate debt
Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.
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Sell some investments
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Get a second job and save your earnings
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Skip a year's vacation
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Gift from Family
Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment. |
California Home Loan Interest Rates
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