What kind of a down payment can I expect when I buy a home?

The down payment will be determined by two factors: The purchase price, and the type of loan program.

What kind of a down payment can I expect when I buy a home?  This is a question most new home buyers are asking.  There really is not a simple answer.  It depends on primarily the purchase price and the type of loan program you area qualified for.  The purchase price of a home is often dictated by your income compared to the amount of debt you currently owe.  Lenders call this the ‘Debt to Income’ Ratio or DTI.  After reviewing all of your expenses, current income and income history, the lender will take this information and compare it to the guidelines of various loan programs, and will be able to give you a maximum purchase price. 

The various loan programs define what is required as a down payment, and it is usually a percentage of the purchase price.  For example, a conventional loan may require as much as 10% or 20% down.  So if the purchase price of the home is $100,000, then the down payment you could expect with a conventional loan would be between $10,000 and $20,000. 

Loans from FHA (stands for ‘Federal Housing Authority) require a minimum down payment from the buyer of 3 ½%.  So in the same scenario, a home with a purchase price of $100,000 would require $3500 as a down payment. 

FHA and MSHDA loans have smaller down payments, but you must qualify for the program's first time home buyer guidelines.

In Michigan, we have a program called the ‘Michigan State Housing Department Authority’ or ‘MSHDA’.  The MSHDA loan program requires only 1% down, so in the examples of a $100,000 purchase price, one would be required to pay a down payment of $1000.

There is also the USDA Rural Development Authority loan program for rural residential properties, and this does not require a down payment.  However, it restricts where a home can be purchased in terms of location.  So what kind of down payment you can expect will vary depending on the loan program you are approved for from your lender. 

As a Realtor in the Battle Creek area, I try to interview you first to find out what your needs are and with this information, and your approval, forward your name to a lender in my area that I know that specializes in the loan programs that would probably be best for your situation.  For more information about buying a home in Southwest Michigan, you can go to my website at: http://www.michaeldelaware.com/ or give me a call on my direct line at: 269-441-8182.

USDA Rural Development Loans do not require a down payment, but the property must be eligible for the program according to their predefined maps.

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