Buying a home is still a dream for a lot of Americans: you get the peace of mind of having a place to call home for as long as you’d like, where you can raise a family and make great neighbors. Unfortunately, many people have a problem when it comes to making the down payment on a home.
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When you apply for a home loan, you are required to put down a certain percentage of the total value of the loan. While there may still be ways to find 100 percent financing, this can be a dangerous proposition where you end up paying way more for the life of the loan than you would with a down payment. Here’s a quick guide to down payments and a few suggestions to help you come up with the money you’ll need.
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How Much of a Down Payment?
Oftentimes, the banks will have a minimum down payment that you must make in order for them to give you a loan, This gives the bank some security that you will be able to the loan back since you’ll already have money invested.
Typically, the minimum down payment is 20% of the loan, meaning you’ll need around twenty thousand dollars for every one hundred thousand you borrow. Of course, many banks will work with you if you can’t come up with that much money on the spot and have a good credit history, but many financial experts say that you should try to put 20% or more if you can.
So how do you come up with that much cash?
The government offers many incentives to buy a home, including tax breaks, but they also have programs to help you afford a house as well.
If you are a former or current member of the military, there are several different programs you can tap into and find the help you need. You can also find loans at good rates if you decide to go with certain banks.
You may also qualify for some help if you are a first-time home buyer. A quick internet search will give you several options that may be at your disposal to find the money needed for a down payment.
Use Your Savings:
If you have an IRA or a 401(K), you have money sitting there waiting for you. You can easily tap into either of these retirement accounts to find the money you need for a down payment.
Of course, you will be forced to pay some penalties for early withdrawal on either account, but can do the math and figure out if the penalties are worth it to be able to buy the house you want. Oftentimes, the benefits outweigh the problems, so consult with a financial expert to see if tapping into these accounts is worth it for you and your family.
Down payments are usually required, so before you buy, you need to figure out how much you’ll need to secure the loan.
Summer Griffiths writes about money from a family perspective. She’s the one in control of the finances in her family, and has budgeting down to an art! Read her articles around the net.
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