If you’re interested in buying a home, one of the first ways you’ll need to prepare is to start saving for a down payment. Down payment requirements vary greatly among different types of mortgages, but as a general rule, the higher the down payment you can supply, the better. The team at Professional Mortgage Solutions offers a full portfolio of conventional and nonconventional mortgage options to help all types of clients find financing that works for them. Contact us about financing in Rego Park, NY, to learn more about saving for a down payment and get a free quote today.
Down payment requirements are typically much lower for nonconventional loans than for conventional loans. These nonconventional loans are insured by various divisions of the federal government. Because of this backing, lenders have less risk funding nonconventional loans, which means they have little to no down payment requirement. VA loans and USDA loans are two types of conventional loans with no down payment requirement, while FHA loans require between 3.5-10% down.
When it comes to conventional mortgages, which are both funded and insured by private lenders, down payment requirements are less standardized than with nonconventional loans. Different lenders may have different requirements based on each applicant’s financial health and credit history. Typically, 20% is a good rule of thumb to aim for if you are attempting to get financing from a conventional loan. If you pay less than 20% down, you may still be able to get a loan, but you’ll have to pay private mortgage insurance (PMI) each month until you achieve 20% equity. Jumbo loans – loans that exceed lending limits set by mortgage giants Fannie Mae and Freddie Mac – may have even higher down payment requirements.
Starting to Save
There are a few ways that you can begin to save specifically for your down payment. We recommend creating a specific savings account just for your down payment deposits, which is separate from any other savings accounts. It’s important that you contribute to this account on a regular basis. You can auto-deposit to this account from your paycheck or have your bank automatically transfer some cash each month.
Even if you feel like you have minimal extra cash on hand each month, you may want to consider redoing your budget. Look at areas that you could save and transfer that savings directly into your down payment account. If you have high-interest rate debts, you should consolidate them if possible and pay off the debt as quickly as possible so as to avoid paying interest that you could instead be saving.
If it is available to you, you can receive funds for all or part of your down payment as a gift from a loved one or relative. If raising the cash for a down payment is the final hurdle in your path towards home ownership, this is something you may want to seriously consider so you don’t miss the opportunity to get a house you love.
To learn more about saving for a down payment, contact Professional Mortgage Solutions. Our skilled mortgage specialists can help you create a plan for successful saving so you can start on the journey to own a home in Rego Park, NY.