There are some very significant benefits to owning your home instead of renting.  If you own your home, when your homes value appreciates your net worth goes up instead of your landlords.  Another benefit to owning is you can count on your mortgage payment not doing up drastically as rents rise and inflation continues.  One of the most daunting aspects for most prospective home buyers is saving up for the down-payment.   With traditional homes in Gilbert going for an average of over 300 thousand dollars a 20% down payment is over 60,000.  What not everyone knows is that there are other financing options that allow for a lower down-payment than the traditional 20%.  Here at The Reeves Team we are here to give you your options.

What is the least I can put down to purchase a new home?

You can purchase a home for as low as 3% down.  If we take that 300 thousand dollar home and do the math again that is only 9,000 instead of the traditional 60,000.  To first time home buyers 3% is much more attainable than 20%.  The FHA or Federal Housing Administration helps home buyers get approved and they are even willing to guarantee a portion of the balance to the lender.  FHA loans can be as low as 3.5% and have some of the lowest rates available to potential homeowners.  You can still find some lenders willing to do zero percent loans but those are hard to come by and you need to make sure you are looking over the details very carefully and are comfortable with the loan documents.  Active and retired service members, and residents in rural areas also have access to zero percent down loans through the department of Agriculture’s Rural Development program.

What are the downsides to not putting the traditional 20% down?

If you put less than 20% down when you are purchasing a home the government will back a portion of that loan so they lender will be willing to loan you the money.  Unfortunately that government backed portion isn’t free and it is known as mortgage insurance.  There is typically an upfront fee and a monthly payment that will be added on to the mortgage.  On the bright side is if your home appreciates in value and goes above the 20% down-payment threshold you can refinance to remove mortgage insurance.  Some loans also may allow for the removal of mortgage insurance without refinancing once the property value is high enough. Check with your lender to see if this is an option for your loan.

So what do you think? Is it best to save up the 20% before purchasing a home?  Or should you get into a home as soon as you can to start building equity?  Let us know in the comments below.



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