When you purchase a home in Southern California, or elsewhere in the United States, you will in most cases purchase a home with a down payment that’s between 3.5%-to-20 percent of the homes purchase price depending on the mortgage loan that you qualify for.
Lenders require down payments when buying a home because they hope that the financial investment that a buyer makes in a home will keep them motivated to continue making their regular monthly mortgage payments each month and avoid going into default or foreclosure.
The Good and Bad with Low down Payments
Although a down payment of 3.5% or lower is very common in this day and age the reality is that the less money you pay down on a home means you will have to pay more money on the backend thanks to Private Mortgage Insurance (PMI) which could raise your overall mortgage payment by $100 or more each month but you can cancel PMI once your mortgage is 80 percent of your home’s value
Some lenders may also charge more fees at closing if you decide to put less than 20% down on a home so that’s also important to keep in mind so make sure that you ask your lender for the total closing costs you can expect to pay when buying a home.
Low Down Payment Home Loan
If you’re not able to save 20% for a down payment on a home there is hope available thanks to the FHA which has a mortgage loan that most people will be able to qualify for since it only requires a 3.5% down payment but with the FHA there is also a catch since they charge a fee of 1.25% of the mortgage amount so you could find yourself paying an extra $1,250 per year for a home.
To learn more about the down payment required when buying a home, or to view homes for sale in Southern California, contact Fred Sed Realty today by calling us at 949-272-0125 or connect with us online.