Having a down payment is generally important when buying a house. It not only reduces the amount of the purchase price that the buyer is financing, making that buyer more likely to qualify for a loan, but it also helps them have a lower payment that is easier to make. Additionally, a down payment shows the lending company that the buyer is serious, and allows the buyer to get access to better rates and terms in some cases. Without a down payment, a buyer's options may be very limited when it comes to the kind of home they want to buy and what loan choices are available to them. Here are some of the most important considerations.
How Much Should a Home Buyer Put Down?
Buyers are usually expected to put down 20 percent of the purchase price of the home as a down payment. Not all buyers have that amount of money, depending on how much the home they are looking at costs. But if they can save up this amount and offer it, they have a better chance of being approved for a loan that offers a lower interest rate and better fees than what they could otherwise receive. There are lenders that will give loans to buyers without this level of down payment, but they may have other requirements that a buyer may not be able to meet or may not be as comfortable with.
Is a Down Payment Always Required?
Down payments are not always required. There are some programs offered where a buyer can get into a home with no money down. However, these programs are not always easy to qualify for. The type and price of the home the buyer can choose under these kinds of programs may be limited, as most buyers who have no down payment at all will not qualify for a large mortgage. There are also programs where buyers can put less than 20 percent down, but still offer their lender some type of down payment. These programs are usually five or 10 percent down, and can be good options for many buyers.
Saving Up Can Be Worth It
Because no down payment or a low down payment can result in fees, higher interest rates, and the need for lenders to have buyers pay for additional insurance protection, saving up to put 20 percent down can be worth the time it takes to do that in many cases. Not only will the buyer save money on their loan, but they will also have the security of having some equity in their house when they first buy it. This puts them in a better financial position, which keeps them feeling more secure and can help them get through potential financial difficulties.
Focusing on More Than Just the Down Payment
There is more to the issue than just the actual down payment. The total purchase price of the home, the fees and expenses that come with it, the lender, and other factors all matter when a buyer is considering how much they want to put down on a home. By working with a good Chestermere real estate agent and a trusted lender, a buyer can have guidance in determining how much they want to put down, along with how much home they can afford. Then they will have a home they love, an affordable payment, and the peace of mind that comes with these things.
Justin Havre is the top producing REALTOR® with RE/MAX First, Canada's very first RE/MAX brokerage. Calgary real estate is his passion; Justin specializes in Southwest & Northwest Calgary homes for sale. He can be reached at 403.217.0003 or contacted through this site.