Down Payments Explained

Dated: 12/02/2019

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A down payment is the amount of cash a home buyer puts toward the price of anew home. It accomplishes a few things; first it reduces the amount of money youneed to borrow and it reduces the risk the lender takes in loaning the money. Byreducing the risk, the borrower will typically get a better interest rate on the loanand increase the amount of home they can buy.

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How Large a Down Payment Do You Need?

The amount of down payment needed depends on the type of the loan, thelender and the property price itself. While most of the 0% down home loans ofthe last decade are gone, Veterans can still purchase a home loan with no downpayment. Other programs include FHA loans with as little as 3.5% down.Conventional loans typically require a 20% down payment, but some allow aslittle as 5%.

Is it Better to Make a Larger Down Payment?

In addition to the down payment, buying a home also requires cash for closingcosts and some reserve savings to guard against unexpected financial concerns.One thing to remember though is that any financing with less than 20% down willrequire private mortgage insurance – a monthly payment which protects thelender in the event of default.The best amount of down payment should be determined in consultation withyour lender and your tax or financial advisor, but the quick answer is “it depends.”By working with a trusted lender, explore your options and you will make the bestdecision for your needs.

If you would like more information on the best type of loan to fit your needs or speak to one of our preferred lenders feel free to reach out to me anytime at 720-434-6440.   

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Jason McLaughlin

Jason has lived in the Golden and Arvada area for more than 25 years attending Golden High School and then later gaining a Bachelors of Science Degree in Organizational Leadership and Emergency Manage....

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