The first thing any homebuyer needs to do before looking at Alexandria homes for sale is to start saving for a down payment. Depending on your circumstances and the loan programs you qualify for, the amount required can vary significantly. The median is around 13% for all homebuyers and around 7% for first-time homebuyers. The sooner you start researching your loan options, the sooner you'll know which magic number is the right number for you.
Down Payment Requirements
- VA Loan
If you're active duty, a veteran, or spouse, you may qualify for a VA-backed home loan. These loans require 0% down making it considerably easier to step into a new home. These loans are backed by the VA, but borrowers are still required to meet the lender's lending requirements to qualify for the loan.
- USDA Loan
Thinking of moving to the country or seeing a hobby farm in your future? The USDA offers a 0% down loan for low-income rural and suburban homebuyers. USDA programs include loan guarantees, direct loans, as well as home improvement loans and grants.
- Conventional Loan
As a borrower, you'll need to put up 3% with a conventional home loan, including those within the Home Ready and Home Possible programs.
- FHA Loan
If you have a credit score above 580 and 3.5% to put down, you can qualify for a loan backed by the Federal Housing Administration (FHA). However, if your credit score falls between 500-579, you'll need to put 10%. This highlights the critical importance of boosting your credit score long before you start looking at listings for Arden Hills homes for sale, or homes in other communities.
- Jumbo Loan
Most jumbo loans require 10% down. These are used to purchase homes that are above maximum FHA loan limits.
- What About 20% down?
The myth arises from the reality that until 20% of the mortgage is paid down, borrowers are required to pay for private mortgage insurance. This can add up over time, so it's a threshold that most homebuyers want to reach as quickly as possible. The more you put down, the sooner you can stop paying PMI and save that money each year.
Running Up That Hill to Reach the Goal
It can be daunting to save up for a down payment, but daunting is not the same as impossible. With careful planning and dedication, there are plenty of ways to save up 3%, 5%, 10%, and even 20% for a down payment, including:
- Add saving to the budget. Each month, deposit a fixed amount into a dedicated high-interest savings account.
- Sell off the collections. Whether it's old baseball cards, furniture, antiques, etc., convert clutter into cash.
- Trim the budget. Reduce monthly expenditures as much as possible, and put the savings into your savings.
- Request cash. Let family and friends know what you're saving for a home, and cash gifts are the best gifts.
- Freelance. Take your skills and expertise and convert these into a side-hustle. A few extra hours of freelance work per week can cause your savings to rise quickly.
We encourage you to call today for more information about lending requirements and how to save up for a down payment.