Florida Keys Residential & Luxury Real Estate
Derrick Johnson

How much is a down payment really?

So you want to buy a home. Congratulations! That’s the first step. Now that we have a goal, you may be wondering what comes next. Should we start looking for your home on sites like www.DerrickSellstheKeys.com, www.Realtor.com, www.Zillow.com, www.Trulia.com? The answer is not quite yet. We have a few steps to get to first.

I would recommend you have a conversation with your favorite lender or mortgage consultant. If you don’t have one, your local bank does and I can surely help give you some reputable lenders in the area if you would like. The conversation with the lender is going to be informal at first. The whole point is to get an idea of what you can afford. You do not have to get a pre-qualification just yet, though you will want that pre-approval before submitting an offer. Right now you want to talk to them about your income and expenses, your debt-to-income ratio and what type of loan you will qualify for. This is where the conversation will turn to your down payment.

There are many different loan products available these days, there is no “one size fits all”. If you are a Veteran of the Armed Forces, you may qualify for a VA home loan. One of the best reasons to use a VA loan is because there is no down payment requirement. That’s right, Zero…nada. Fannie Mae offers loans with as little as 3% of the purchase price as a down payment. FHA loans can be as low as 3.5% down and there are even conventional style loans that can be done with only 5% down. Of course, there is the traditional mortgage that you can put 20% as your downpayment. That’s a lot of different options. So you can choose which one suits your needs.

There are also down payment assistance programs available through some lenders as well as the $10,000 Home buyers Assistance program through the City of Marathon to help with the downpayment and also with closing costs. Let’s take a quick look at what these down payments would be on a $375,000 home like this one at 700 74th Street, Marathon, FL 33050.

VA Loan would still be $0 down.
Fannie Mae (3%) would be $11,250
FHA loan (3.5%) would be $13,125
Conventional (5%) would be $18,750
Traditional (20%) would be $75,000

As you can see, there are many options. Not everyone has $75,000 sitting around to make that traditional loan down payment. Your downpayment isn’t the only thing you’ll have to pay at closing, but it’s a good idea to start saving for it now. A little bit every month can add up. You can also use certain 401k programs and other retirement investments. Talk to your financial planner and lender to find out about these options. You can also get a gift from a family member and use the down payment assistance programs to help offset the high initial investment. Starting to save early and often will give you a solid ability to put down the down payment you need to buy the home you have always wanted. If you would like to know more, give me a call and let’s get started.