How to save for a down payment

It might seem like it will be costly to purchase a home, and you might think that you will have a considerable down payment. Oftentimes, because people think that they cannot afford their down payment, they’re forced to keep renting. Although you might think that it’s impossible to afford your down payment, it might be more possible than you’d think.

How Much Should I Save for My Down Payment

Prospective homebuyers often think that they need to have 20 percent down on their house before they purchase it. Although this number is probably ideal, you don’t need to put down 20 percent, as you can find ways around this number. In actuality, many mortgages offer buyers a much more manageable minimal down payment. Here are some ways that you can finance your down payment if you’re concerned about covering it:

Conventional Loans

When you use a conventional loan, you’re able to put down small payments, usually around 3 percent. Therefore, if you’re purchasing a home that is around $300,000, you’re only going to have to put down $9,000. It’s important to note that even if you opt for this choice, you’re going to have to pay for private mortgage insurance if you own less than 20 percent of the equity in your home.

FHA Loans

The Federal Housing Administration offers loans that allow you to put 3.5 percent down on a home. So, you could put down around $10,500, if you’re purchasing a $300,000 home. Remember, to qualify for these loans, you’re going to have to have relatively good credit, around 580.

VA and USDA Loans

If you’re using a loan from the United States Department of Veterans Affairs, you don’t have to put down any kind of down payment. Moreover, if you qualify and decide to use a United States Department of Agricultural loan, you don’t have to pay a down payment, either.