Are you ready to become a homeowner? Are you tired of renting and want to own your very first home? Worried about how much of a down payment you need in order to buy that Lake Havasu home of your dreams? Stop for a moment. Take a deep breath. You might not need as much as you think you do to become a homeowner.
Down Payment for Home Buyers
The 20% Rule
Financial experts suggest that you put 20% of the purchase price down when buying a home. In Lake Havasu, buyers paid a median sale price of $345,000 in January. If you use the 20% rule, that means you need a down payment of $69,000. Closing costs add another few thousand dollars to your total costs. That can be overwhelming to many home buyers. When you put 20% down, you avoid paying PMI (Private Mortage Insurance). Also, you look more attractive to both lenders and sellers when you put more money down. Sellers see that you mean business. Lenders offer better terms. Plus, when you put more down, you borrow less. Combine that with no PMI and that means you pay a smaller monthly mortgage payment.
On the downside, using that larger amount as a down payment might cut into your emergency fund. You want to put some money aside to allow for repairs or updates that may come up while you live in your Havasu home. Plus, it takes much longer to save up that amount of money. So, if you want to purchase a property now, you may want to consider other options.
Lower Down Payment Required
Luckily, lenders offer other loan options that require less of a down payment. FHA requires at least 3.5% with a FICO score of 585 or higher. If your credit score falls below that, you might need to come up with 10% to qualify. Some conventional loans require 5% down. But your credit score needs to be at least 620. Some lenders may even ask for as little as 3%. If you or your spouse ever served in the military, you could qualify for a VA loan at 0% down. Talk to your lender to find out about all of your options before choosing one.
Arizona Down Payment Assistance Program
Still struggling to meet that 3-5% down payment requirement? Arizona offers a down payment assistance program called Home Plus. This program offers money to cover your down, your closing costs, or both. It works as a “silent second” that is totally forgiven after three years of living on the property. Your debt cannot exceed 50% of your monthly income and your household income cannot exceed $105,291 per year. For more information, Arizona Down Payment Assistance Program website.
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