Being in the real estate business, one of the most common things that seems to scare off potential first time home buyers is the size of their first down payment. A lot of people think that you need to put upwards of 20% down when you purchase a home; and when the median home price for homes for sale in Gig Harbor is about $350,000– we can see why that would scare people off. While in some cases, this may be true, it’s certainly not always the case. Qualified buyers often put as little down as 3.5% down, some qualified buyers may not even need to put down anything! Let’s take a look at different loan options available for home buyers:
1. FHA loans can get you as little as 3.5% for your down payment.
FHA loans, through provided through HUD, or The U.S. Department of Housing & Urban Development are mortgages insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Minimum qualifications for FHA loans, like all loans, require minimum credit scores– in this case, usually around 600. If your credit is low, we recommend starting with our series on getting your finances in order, written by Uprealty founder Katie Powers.
2. VA Loans provide similar loan benefits for qualified veterans.
If you’re a veteran, one of the best things you can do is to talk to a qualified VA loan specialist. VA loans come with a unique set of advantages. For example, unlike FHA loans, they don’t require mortgage insurance or PMI. VA loans are also typically extremely competitive when compared with other conventional types of loans.
3. Mortgages without PMI typically do require larger down payments.
It’s true. Some loans, without private mortgage insurance, do cost upwards of 20%, which is a lot. So what can you do? A lot of people get help from their parents, live in apartments, or with significant others or friends until you save up enough money.
Regardless, one thing you can do if you’re looking at homes for sale in your area and want to begin the buying process is to start talking to a loan officer and a Realtor (hey, that’s us!) immediately. The sooner you know your options and can figure out what you’re up against, the sooner you can start making a plan. As always, if you have any questions on where to begin, please contact us today!