How much should I really have for a down payment?

Question

I keep hearing that I should plan on a 10% downpayment. I always thought down payments are a lot less! For example, maybe 3% or 5%.

Obviously a 10% downpayment would be better if at all possible. But what does the *typical* lender require? Is 10% standard nowadays?

I have bad credit now, but am hoping to clean it up and get a loan in 5 years. So hopefully I can get good terms then, but I need to know what's standard. Thanks!

Answer 1

cheaper interest requires 20% down.

the less you have down, the more you'll be charged in interest.

and if you have less than 10% down, private mortgage insurance will be required on top of the interest, which you'll pay for.

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the financial markets are all currently going through their once every two decades refresher course in understanding risk and when to not lend money. probably, in 5 years they'll have completed the course and will then be back in business looking for solid risks that are worth taking.

also hopefully, in five years the recent excesses of price will have been wrung out of the real estate markets and the relationship of prices to rents (and thus to income) will once again be back to normal.

so, by then, 10% down may get you into a home that you can both afford and actually get a loan to finance. IF your credit is fair to good by then.


GL

Answer 2

I wouldn't consider a down-payment less the 10%. It's just not in your best interest, especially if you have bad credit. Focus on getting your credit situation cleaned up and then saving for a down payment of at least 10%. Check out your local city government's housing office to see if they have any local or state programs to help first-time homeowners. I took advantage of two and they were great, offered discounts on interest and other closing costs and help with understanding the costs of home maintenance. Look the credit industry is really not your friend - the big institutions are there to make money, even at your expense. Shop around for a loan officer who is invested in helping you with a loan you can afford - which means having enough money to pay your bill, save for retirement and emergencies. Many banks and brokers will sell you a loan you can't afford and insist that you can afford to house that would eat up half your paycheck every month. You will want to believe them but don't. There is a reason that the housing bubble has burst and easy credit and mortgage gimicks are it. Good luck.

Answer 3

These days the minimum is 10% due to the subprime shakeout. If you can scrape up 20% you should be able to find a reasonable lender. Below that they will rake you over the coals.

Good luck, save as much as you can!

Answer 4

If you have good credit, you can still get 100% financing, however you have stated that you have bad credit, which means you are probably going to be limited to 10% down.