Many of the questions we receive from homebuyers concern down payments. This is not a surprise; knowing you need to pay a chunk of money upfront to buy a home may seem daunting. But the world of down payments is one with a lot more flexibility and affordability than many prospective homebuyers realize. In this two-part series, we will be answering some pressing questions you may have about down payments.
Downpayment FAQ’s
Q: How much of a down payment do I need?
A: The most pressing question you probably have about down payments is how large a down payment you personally need to make to buy a home.
The answer to that question depends on a variety of factors, such as:
- Your credit score
- Your debt-to-income (DTI) ratio
- Your income and assets
- Your veteran status
- Where you are purchasing a home
- What type of mortgage you are applying for
One borrower might need 20%. Another might need 10%. Still another might need 3.5%, and so on. During your consultation, we can help you determine the down payment amount you will need.
Q: What are the pros and cons of large vs. small down payments?
A: Even if you can make a small down payment, that does not always mean it is the best option for your financial scenario. Making large and small down payments both have pros and cons.
If you make a large down payment, that will reduce the liquidity of your finances, tying up more money in your home. But on the flip side, if you put down enough, it may get you out of paying for mortgage insurance. You also will be closer to paying off your home loan, which can reduce the interest you will pay over the lifetime of your loan. Plus, your rate may be lower thanks to the larger down payment.
Q: Can I use gift money for my down payment?
A: Yes, in fact, it is very common to use gift money for a down payment. It is important to document where the money came from carefully to ensure that you are allowed to use it for this purpose.
Get Answers to All Your Down Payment Questions
You now have answers to some questions you may have had about down payments. But you probably still have additional questions. During your consultation, we can answer all of your questions about down payments in-depth. To begin, please contact MMS Mortgage Services at (248) 788- 0800. We can help you buy a home or refinance in Michigan or 15 other states.
Do you know how much home you can afford?
Most people don’t... Find out in 10 minutes.
Get Pre-Approved Today
