Down Payments Explained

Very few people have the cash in the bank to be able to purchase a house outright. Homes cost hundreds of thousands of dollars, typically, to buy. It is difficult for any one person to have that kind of cash. That is why mortgages exist. You get a loan from the bank or mortgage company to buy the home and the home is used as collateral for the loan. Banks will not give you the entire value of the house in cash though, you need to pay a down payment. This gives you something to lose and alleviates some of the risk for the mortgage provider.

So, how much do you have to give for a down payment? It will depend on the type of loan that you want, your credit score, and how much money you have. A traditional FHA loan will require a minimum of 3.5% down. Conventional loans may require as little as 5% or up to 20% of the sale price. Furthermore, hard money lenders may not require any money down. It all depends on the type of loan that you are getting. You can always discuss with your mortgage officer or private financer how much they will want down for their loan.