You know that saving for and collecting a down payment is one of the first steps in the home buying process. But do you know how much do you actually need for the down payment?
A lot of consumers are still under the assumption that they will need to save 20% of the purchase price of their new home as the down payment. But, while 20% will put you in a good position, it is certainly not necessary anymore.
According to the Cromford Report and the latest Ellie Mae Origination Insight Report, the average loan-to-home value for the three top loan products are:
- VA loans – 98%
- FHA loans – 96%
- Conventional loans – 80%
This means that those with a conventional loan are still putting an average of 20% down, but those with a VA or FHA loan are only putting 2-4% down. Saving for 2-4% of a Scottsdale golf home is much more realistic and doable for many people.
In fact, over one third of purchase loans have less than 4% down payments. The loan market share in July put conventional loans at only 62% of all loans with VA, FHA and other programs making up the remaining two-thirds of the market. Although these loan programs are geared more towards first time home buyers, and there are strict guidelines for qualifying for a VA loan, the alternate loan programs are definitely worth looking into and can make your Arizona golf home more attainable and affordable.
The high market share of FHA loans is also a strong indicator of a recovering real estate market and economy. In July 2015, FHA loans made up 24% of the market. Just one year ago these loans only made up 17% of the market.
Conventional loans typically require 10% or 20% down, though now there are some loan products that require as little as 5% down. FHA loans require at least 3.5% down and dictate that you pay mortgage insurance throughout the life of the loan.
Working with a trusted, professional real estate agent is key, even in this early stage of the process. Your real estate agent can recommend a mortgage broker to help you figure out which loan will be right for you and your situation, as well as how much you should plan to contribute to the down payment.
Another helpful reminder: it’s also a good rule of thumb to keep a savings account for any home emergencies that may pop up. This is especially true for first time home buyers who are not used to repairs and maintenance. A home warranty can also help with this.
If a lower down payment makes Arizona golf communities more appealing and attainable for you, contact the Matheson Team today. As specialists in Arizona golf homes, we can help connect you with professionals to choose the best loan product for your situation and get you in your perfect home on the green.
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255
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