How Much is a First-Time Homebuyer’s Down Payment

Do you watch home and garden television channels or scroll the internet imagining the next chapter of your life as a homeowner? Are you looking to get out of a rental and into the home of your dreams? Great news! There are resources to help you though nearly every step of the homebuying process- from acquiring to maintaining your home- beginning with your first time homebuyer down payment.


Preparing to buy your first home

Luck favors the prepared. Before making the leap, homebuyers are commonly reminded to save for their down payment on the home loan. However, there are a few extra costs you can prepare for.


1. Inspection

As of 2022, these can run from $200 to over $600 on a national average. Some states, counties, cities, and lenders mandate basic inspections. If you’re not sure which inspection you need, check out some of our helpful guides on home inspections including: what to look for in a home inspector, what is a home inspection , what you should expect from a home inspection and what major tests to request at a home inspection.   


2. Property taxes

These may be included in your monthly mortgage. If not, they vary based on your home’s style, features, and location. Although the price fluctuates regularly, the national property tax average on a single-family home in 2020 was 1.1%.


3. Home maintenance and repairs

A good rule of thumb is to try to have between 1-4% of the home’s cost available each year for repairs. So, for a $300,000 home, you will ideally have between $3,000-$12,000 on hand. While you may not need that money every year, it is good way to ensure that, should any major repairs come up, you are covered.


How much is a first-time homebuyer’s down payment?


Most Americans think a first-time homeowner’s down payment has to be a minimum of 20%. Lucky for you, as a novice homeowner, you might be able to whittle your down payment to as little as 3% to 6%. In some circumstances, you might not need one at all. When lenders are deciding how much of a loan to give you, they review:


  • Credit history
  • Employment history
  • Tenant history
  • Current income
  • Current debt
  • Assets and investments
  • Lifestyle details such as marital status


You don’t have to have a perfect track record in any of these areas to get approved for a mortgage. With a credit score of 620 or above, saving  4% for your down payment should have you covered. If you qualify for a VA or USDA loan, you could easily get 0% down. With loans like the FHA (Federal Housing Administration), even if your credit score falls below 600 and you have a debt-to-income ratio of 50% or higher, your first-time homebuyer down payment can still be competitive.


To qualify for a VA loan, you must have served in the military under at least one of the following circumstances:


  • You served 6 years and 1 day in the National Guard
  • You served in a war for at least 90 days
  • You served 181 days outside of war
  • You are a surviving spouse of a service member who died or became disabled while on active duty


To qualify for a USDA loan you must have:


  • Legal USA citizenship
  • Reliable income
  • A minimum credit score of about 620 to 640
  • A household income equal to or greater than 115% of the area’s median income


How much should a first-time buyer put down on a loan?


This is entirely up to you! Even if your first-time homebuyer down payment is 0%, remember you’ll be paying interest on your mortgage. The amount you put down is an opportunity to shed a little bit of interest and lower your monthly payments. If you buy a house for $300,000 and opt to put 4% down on a loan with 3.5% interest instead of no down payment, your monthly bill could jump from an average of $ 2,144.65 to $2,058.86.


How to get the best first-time homebuyer down payment possible


1. Use a home loan calculator

If you’re curious about how your down payment will affect your monthly payments, the home loan calculator is a great place to start. Test multiple calculators to get an estimate of how much your income and credit score will qualify you for.


2. Compare lenders

Don’t jump for the first offer you see. It’s also not wise to accept the highest bid simply because you’ll have more buying power. Understand what you know you can comfortably afford each month while continuing to set aside money for routine maintenance and emergencies. Great loans aren’t solely about the amount of the loan and the interest attached.


A lot of buyers gravitate toward some loans because of the minimum required credit score and down payments. However, being able to analyze a loan to see which one is the most cost-effective in the long run could positively impact your financial wellness. How much is the mortgage insurance? Remember that’s not the same as homeowners insurance. Is the interest a fixed rate, or will it fluctuate after a set amount of time? Is there a limit on how much those rates can go up? How might refinancing affect this loan in the future? Asking the important questions upfront will help you make the best moves upfront to prevent buyer’s remorse further down the line.


To learn more about the homebuying process visit Centex’s learning center.


Looking for more Foundation tips and learning? Return Home here.

Published 05.12.22

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