What is a downpayment and how much do you need?
With mortgage rates at historical lows and more people than ever working from home everyone is asking how they can they purchase a house or condo.
Step 1 is getting a downpayment together. There are a range of downpayment options ranging from 0% if you are a Veteran all the way up to 25% or higher down if you want a lower loan amount.
So for example if the house you want to buy is $300,000 and you want to put 20% down you will need to have $60,000 to put toward the house.
Then a bank or lender like Quicken Loans will loan you the remaining $240,000 . This $240,000 loan is also called a mortgage.
See below for amount you would need to put down for different types of loans for a $300,000 loan
So explore all the options and programs to see how much of a downpayment you will need. If you aren’t sure you can reach out to lenders like Quicken Loans and they can help guide and ask you the right questions.
5 ways to get the money for your downpayment?
So hopefully you have some money saved, but house are freaking expensive and coming up with a downpayment is hard. Here are a few more ways you can stretch to your target number.
- Borrow from 401k – More info
- You can borrow up to $50,000 from yourself if you are lucky enough to have some money in a 401k
- The catch is that you also have to pay yourself back, with interest.
- Gift from parents or family members – More info
- Parents can gift you $30,000 for a downpayment. Anything over that and they have to pay the “Gift Tax”
- Other family members or friends can gift you $15,000 before the gift tax kicks in
- You may need to put a gift letter together to prove intent and the source of the gift money
- Buy a home with your friends or family members
- Combine forces! – You will need to put a more legal agreements in place but this is a fantastic option for certain people
- This option also helps spread the burden and risk of making the payments also.
- Save more — It’s obvious but start saving more now – Use auto transfer right after pay day from your paycheck, even if it’s a small amount. If you put $40 a paycheck (so once every 2 weeks) by the end of the year you will have saved more then $1,000 – Transfer to a high yield savings account to get as high interest as you can, like a boss.
- Is this a second home? – Cash out refinance – Ok slow down moneybags. Have you thought about taking money out your primary property. A Cash out refi is a great option you can find out if you qualify here: www.lowermybills.com
Need more help? Want to speak to a local realtor and get some cash back on your Home Purchase. Check out Rocket Homes here. They will match you with top experts that are local and experienced in the are you area you are looking to move to.