In most cases, your parents know best. But when it comes to buying a house and your down payment, you may not want to follow every word of advice (sorry, dad). According to TowneBank Mortgage Loan Officer Pat Miller, it’s one of the questions most frequently asked by clients, and apparently, our parents are to blame!
“Putting 20% down is an old rule of thumb in real estate,” says Pat. “People know they need to save money to buy a home, but there are other, more important factors when it comes to your finances that factor into whether you’ll be approved to buy a home and how much you can afford.”
So, let’s start from the beginning. What is a down payment and how can I decide how much to put down on a new home?
Pat: Your down payment is the amount of money you are going to pay upfront for your home, so if you’re paying 10% on a $100,000 home, your down payment will be $10,000.
That’s the easy part to understand. The more difficult piece, is figuring out the right amount for you, based on your financial situation, right?
Pat: It can be confusing, but my job is to ask the right questions of my clients so I can help them put together a plan that will allow for them to continue to save money AND decide on a mortgage payment amount they are comfortable with each month.
So what’s the least amount of money I can put down?
Pat: You may be able to put down 0%, and your monthly payment won’t go up as much as you think. If you’re a first time home buyer, there are programs that allow you to put nothing down, if you qualify. Just as a general rule of thumb, for every $10,000 you put down, you’re only saving about $50 per month on your mortgage. For some clients, it’s a better financial long term decision for them to pay a little bit more per month on their mortgage, and still have money in their savings.
What else can I do to get myself ready to buy?
Pat: Before you meet with your loan officer to start the process, there are a few things you can do:
- Renting for at least 12 months before you buy a home looks good to an underwriter. It shows you can handle a mortgage payment each month.
- It’s also important to show you are responsible by paying your credit card and other bills on time.
- At any point in the home buying process, you can always call your loan officer to get tips and information. We’re here to help.
- Our mortgage app is a great way to stay up to date on the loan process and calculate your payments. You can download it in the app store by searching TowneBank Mortgage.
Pat Miller is a Loan Officer with TowneBank Mortgage in Virginia Beach. He can be reached at 757-390-6314 or pat.miller@townebankmortgage.com. NMLS #698968