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How Much Do I Need To Put Down To Purchase A Home?

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Home Buyers Are Confused About Their Down Payments

Many Buyers are looking at purchasing homes in this new COVID time.  There are many people working from home that need more space, or people looking to move or downsize, and many people have misconceptions about how much money they will need to put down to get into their next home. 

Why Do I Even Need To Put A Down Payment On A Property?

A down payment is needed because when purchasing a home, many Buyers do not have all the cash in their pocket to go and buy the property they want.  Therefore, banks have developed mortgages so they can lend you (the Buyer) the money to purchase the home, but they aren’t willing to give you the full loan amount because then you would have no incentive to pay that loan back and would most likely increase the chances of the borrowers defaulting on their mortgage.  In order to counteract bad outcomes like that, lenders require down payments that fluctuate between as low as 3% of the property purchase price, to as high as you would like to pay.  

What Is Your Ideal Down Payment?

Why Do I Have To Pay A Down Payment and Then Also Pay Closing Costs?

When purchasing a home, your lender will require a down payment, but a down payment isn’t all that you will have to pay.  You will also have to pay closing costs.  Closing costs include the fees charged for taxes, insurance, escrow fees, and many different fees in order to close the transaction.  Generally, you will get a “cash to close” number that will tell you exactly how much you will need when you purchase your home. 

How Much Do I Put Down On My Home?

Most people when purchasing a home like to put down as little as possible which can generally be around 3-4% of the purchase price when you are talking about being a first time buyer or if you have no previous FHA mortgages under your name.  That being said, it may not be in the best interests of yourself to put down as little as possible depending on what your goals are for this purchase.  If you make a decent income and can feel safe with a higher monthly payment then it may behoove you to put down less on the home and take the excess funds you save and invest those funds, however, if you have a job that may have uneven income streams or lower than average income it might be better to save up a little more because then you can have a lower payment and feel more comfortable in your home purchase.  

You Need A Real Estate Broker and Lender

That being said, the best thing to do is to speak with a qualified Broker like myself, or work with a Lender to get a pre-qualification.  The pre-qualification will look at your financial well being and let you know how much you will need to bring to the table to close, and how much your monthly payments will be.  If you are looking for lender referrals, we would be happy to help you find someone that will work best with you.  It is also best to shop 2-3 lenders at least to make sure that you are getting the best terms for your situation. 

Serious About Buying A Home: Get Pre-Qualified

Until Next Time,

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Synergy Real Estate & Property Management
Sunny Advani
Personal Lic # 01869864
Office Lic # 02012941

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About The Author
Sanjeev Advani

• Hundreds of Investment Real Estate transactions successfully closed • 350+ Units currently under Property Management • 3+ Years of Construction Management Experience • Certified Property Manager, CCIM (In Progress) • Bachelors in Finance • Bakersfield, CA Native Deep Dive: I have been licensed in real estate for almost 10 years, and I have been specializing in investment and commercial real estate for the past 6 years. Through the years I have worked with Real Estate Developers, Investors, Average Joes, and many more. I am a Bakersfield native, and my educational background is in Finance. I have just completed the CPM (Certified Property Manager) certification which is one of the most prestigious designations in the Property Management Industry, with less than 1800 members world wide. I am also the President of the Board for Habitat for Humanity Golden Empire, the Vice President of the Board for Income Property Association of Kern County (IPAK), and Vice Chair of the Commercial Investment committee at the Board of Realtors. I look forward to working with you towards your real estate investment goals. Sunny Advani California Agent Lic# 01869863 | California Broker Lic# 02012941 Email: Sunny@RE-Synergy.com | Phone: +1 661 235 5726