Down Payment Money

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Very few people can find a house and just buy it with cash. The average person will need a mortgage. A mortgage is a loan that often requires at least a minimum down payment, private mortgage insurance, and then ongoing monthly mortgage payments until the full amount is paid off.

The monthly mortgage payment amount will vary by the purchase price of the house, the down payment that is placed, and the type of loan that is used to finance the purchase. Additional costs such as interest, service fees, and other costs may also factor into the amount that you will pay.

What is a Down Payment?

The down payment is the amount that you will pay to secure the home while finalizing the actual sale. In some cases, a larger down payment can give you some advantages.

How a Larger Down Payment Can Help You

If the bank requires a 3% down payment but you can come up with 5% or more, you may be able to get a more favorable loan. That could mean:

  • Smaller monthly payments
  • Paying less in interest costs and service fees over the life of the loan
  • Qualifying for a far better interest rate
  • Being able to qualify for a larger loan amount upfront

How the Larger Down Payment Can Hurt You

Offering more than the minimum down payment requirements may hurt you in other ways though.

  • It may leave you with less money for additional and unexpected costs including the closing costs and moving expenses.
  • Depleting your savings could also leave you vulnerable to any repairs that you may need to do in the new house.
  • The large down payment may mean that you have some lean months in your new home until you can start rebuilding your savings account.

How Can I Get Money for a Down Payment?

Getting the money together for a down payment can be as simple as saving as much money as possible. Before you start looking for houses and swooning over open floor plans, it is time to get real with your finances.

  • End all redundant, recurring bills like multiple subscriptions to streaming services.
  • Consider using a less expensive service for phone and internet service. If you still have a landline phone but have not used it more than once in the last month, it is time to cut that cord once and for all.
  • Streamline your budget by cutting out unnecessary trips to the store. If you are pressed for time, use a food delivery service like Hello Fresh. It’s more expensive than groceries, but far cheaper than eating out or ordering take-out.
  • If food delivery is not for you, save money on groceries by joining Swagbucks. You can upload your receipts and earn cashback on thousands of items.
  • Put any extra funds (tax returns, stimulus checks, holiday cash, work bonuses) towards your down payment.
  • Cut out (or cut back) on your Starbucks habit. Go 4 days a week, not 5 or 6. Get a smaller drink or a less expensive one. Or maybe you can kick it, cold turkey, altogether.

Use a Side Hustle to Get Down Payment Money

All of the things above are a good start but are in no way enough to build up your down payment savings. Most people are going to look for additional ways to earn some money and there are several side hustles that you can try to get that done.

Always choose a side hustle that will allow you to earn money, on your own time without it becoming a problem. It is supposed to be a hustle, not a hassle.

  • Swagbucks is more than just a way to save some money. Did you know that you can earn points that are redeemable for cash or gift cards on Swagbucks? After creating an account (it takes minutes and is completely free) You can start earning money right away by taking surveys, playing games, and taking part in other tasks. You’ll get notifications by email, text, and through your account.
  • Upromise is more than just a way to save for college. You can use the site to save money for anything including the down payment you need to buy a house. Link a 529 savings plan when you sign up and get $30 as a signing bonus. Link your account to a branded Mastercard and start earning cashback on every purchase you make with it. (Amount of cashback will vary by the purchase.)
  • Sign up to drive with Lyft. As a bonus, you can use this time to check out neighborhoods and get a feel for the commute from various places.
  • Take up freelance work with Fiverr. Whether you are a writer, editor, graphic artist, or whatever, you can find work that fits your schedule.

What is Down Payment Amount?

Your down payment amount will vary by many factors. These include:

  • The amount that the mortgage lender requires for the loan you qualify for.
  • The type of loan that you qualify for. A conventional loan may require as much as 5% down while some loans from the federal government like a USDA loan may have zero down required.
  • Your real estate agent can typically point you in the direction of mortgage lenders that are easier to work with in terms of getting a lower down payment.
  • Your loan may also be impacted by your current credit situation. Most lenders have a minimum credit score for each of their loan products.

How Much is a Down Payment on a 300k House?

For an FHA loan, the minimum down payment would be $10,5000. For a traditional loan, the down payment requirement could be as high as $60K. And there are other mortgages that will have different requirements altogether.

  • FHA loans, which typically require around 3.5% down would mean a down payment of $10,500
  • A conventional loan that does not require private mortgage insurance may need a down payment of as much as 20%. In this case, the amount would be $60,000.
  • Other mortgage types including USDA loans, Fannie Mae and Freddie Mac loans, and a VA loan will also have their own requirements.

Can I get a loan for a down payment?

The best answer to this question is maybe. Some lenders may see needing a loan for the down payment as a troubling sign and may not approve mortgage loans for you. But, there are programs that can help you with your home purchase.

  • Most down payment assistance programs offer either grants or special loans, depending on who is administering the program and the location.
  • Most programs require you to be a first-time homebuyer.
  • You may be required to attend special classes in home finances.
  • You may be required to buy a home in specific areas.

The programs can include:

  • Grants. These are gifts that never need to be repaid.
  • Forgivable loans. These carry 0% interest and are usually considered forgiven within 5 years of the loan’s life. There are some forgivable loans with longer periods and you should know that if you move or have to sell before the time is up, that money must still be repaid.
  • Deferred payment loans, also at 0% interest rate. With these loans, you will not make payments until the primary (mortgage) loan is paid off.
  • Matched savings loans. With this, you will put money into a specific account. The government will then match the deposited amount to give you the full down payment amount.

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