Sometimes people ask me, what do I have to put down? What kind of loan should I get for my home? Here’s the lowdown in very simple terms.
Conventional loans usually have the best interest rates, but you’ve got to put down between 10 and 20%. That’s $25,000 to $50,000 on a $250,000 property. Make sense?
First time buyers, who may not have a large wad of cash saved, may choose a Federal Housing Authority (FHA) loan, which requires a 3.5% down payment. That’s only $8,750 on that same $250,000. Don’t forget you’ll also need some cash for closing costs, but that’s a much easier amount to save, isn’t it? Keep in mind if you put less than 20 percent down on any type of mortgage (other than a VA loan), you’ll be paying for some type of mortgage insurance, at least until you have 20 percent equity in your home.
Veteran Affairs, or VA loans, which are only available to veterans, allows you to put 0% down and, like I said before, doesn’t require private mortgage insurance.
United States Department of Agriculture, or USDA loans,also available with no down payment, were created for the purchase of rural property and land and are often used by investors.
Sometimes, people go for an Adjustable Rate Mortgage, or ARM, which requires a minimum down payment of 10%. Rates start out low and fluctuate with the market. These are a risky endeavor, and not something I would recommend.
Before I show anyone homes, I always recommend they obtain a pre-approval letter. If you’re looking for someone to help, contact Eric Nowik, of HomeServices Lending, who works out of my office, Berkshire Hathaway HomeServices KoenigRubloff Realty Group in Lake Forest, IL.