What's Needed for a Downpayment on a House?

Becoming a homeowner is both a personal and financial goal many people work to achieve. The mortgage payment on a house is often times less than a monthly rent payment and when a house's equity increases, so does the owner's net worth. For most, the purchase of the home is going to be the largest purchase, and investment a person makes. There are many things needed to achieve the goal of home ownership, and one of the most important is a down payment.

Simply put, a down payment is the amount paid upfront for a house in addition to the amount to be financed. The amount of down payment a buyer can afford will greatly impact the amount he or she can pay for a house or the terms of the loan they will be using for the purchase of the property. For example, the larger a down payment a person makes the lower the monthly mortgage payments will be or the larger amount he or she will be able borrow towards the purchase of a house. 

The amount a potential home buyer will have to save depends on the type financing he or she will be using and the personal situation of the buyer. For a conventional 30 year mortgage, a home buyer can be expected to save anywhere from 5 to 20 percent of the total price of the home, depending on his or her credit score and other factors. . It is important to keep in mind that if a buyer is going to be making a down payment of less than 20 percent, he or she may be required to purchase mortgage insurance. 

Saving 20 percent towards the purchase of a home might be difficult and take an incredibly long time for some first time home buyers or home buyers with lower incomes. There are other financing options for these types of buyers though. For example, if a buyer is able to save at least 3.5 percent for a down payment and has a decent credit score, he or she may be able to qualify for a FHA loan through the Federal Housing Administration. Other options for low-income purchasers are the Conventional 97 mortgage or the HomeReady Mortgage. Both of these programs require a down payment of 3 percent. Additionally, veterans may have the potential for a zero percent down payment loan through the VA Loan program. All of these financing types have certain criteria a borrower will have to meet. Any mortgage professional would be happy to meet with potential borrowers and discuss the financing options for their particular situations. 

Source:
http://www.zillow.com/mortgage-learning/down-payments/