How Much Down Payment Do I Need to Buy a House in Arizona?
When you buy a home, one of the biggest up-front cost is the down payment. Down payment is the portion of the purchase price that you pay upfront at closing. Generally, if you put less money down on for a home, your mortgage loan amount will be higher. You will pay more in fees and interest over lifetime of your mortgage. Read on how much down payment do I need to buy a house in Arizona?
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What is a Down Payment?
A down payment on a house is a portion of the cost you pay upfront with cash. The balance of the purchase price is paid by a loan you secure from a lender and pay back in a monthly mortgage payment. Down payments are expressed as a percentage of the total purchase price. Your down payment plays an important role when you are buying a home. Lenders often look at the down payment amount as your investment in the home. Your down payment will affect how much you will need to borrow.
When to Pay the Down Payment?
As buyer, you will pay the down payment during closing. The closing is the final step in the process of buying a house in Arizona.
Do I Need Down Payment When Buying a House?
The requirement of down payment is depending on the type of mortgage, the lender and your finances. Lenders require a down payment for most mortgages. However, there are exceptions, such as with VA loans and USDA loans, which usually do not require down payments.
Minimum Down Payment Requirements
The minimum down payment required for a house varies depending on the type of mortgage program:
- FHA Loan (backed by the Federal Housing Administration): 3.5% down payment minimum
- VA Loan (backed by the Department of Veterans Affairs): No down payment required
- Fannie Mae HomeReady Loan: 3% down minimum
- Conventional Loan (with PMI): 3% minimum
- Conventional Loan (without PMI): 20% minimum
- USDA Loan (backed by the U.S. Department of Agriculture): No down payment required
Down payment requirements can also vary by lender and the borrower’s credit history.
Benefits of Making a Larger Down Payment
Your ability to save for a down payment is a good sign that you are ready for the financial commitment and become homeowner. Making a larger down payment can save you money in the long run. Here are some of the ways it can affect your finances:
- Better mortgage interest rate
- Lower upfront and ongoing fees
- More equity in your home right off the bat
- Lower monthly mortgage payment
A lower down payment makes the loan a bigger risk in the eyes of the lender. Home loans with a low down payment typically involve mortgage insurance or a funding fee. The insurance is paid monthly. The funding fee is paid upfront, but can be financed as part of the loan amount or through a higher interest rate.
How Much Down Payment Do I Need to Buy a House?
The amount of your down payment on a house depends upon multiple variables, including your personal financial situation, your income, your credit health and how much cash you have save for a home purchase.
Bottom Line
There are lot you should consider when determining how much down payment to put down on a house. The best way to find out is to consider talking to lender for mortgage pre-qualification. They can help you weigh the pros and cons of each option and point you in the right direction. With so many loan programs available to you, the ability to purchase a new home is closer than you might have thought.
Also read:
How Important Is Your Down Payment on a Home?
How important is your down payment when buying a house?
How to Buy a House with Low Down Payment
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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