In the realm of real estate, a down payment is the initial lump sum you pay when buying property. If you're thinking about entering the market but aren't sure how much you'll need to have in the bank, you've come to the right place.
At Consolidated Community Credit Union, we offer mortgage solutions for first-time homebuyers. Consider this your guide to saving for a down payment on a house.
While there are exceptions to this rule, a "good" down payment is typically 20% or more of the purchase price. Why? It allows you to bypass private mortgage insurance (PMI). PMI is a type of mortgage insurance a lender may require you to pay. PMI protects lenders, instead of you, if you stop making payments on your loan. PMIs can tack on anywhere from $100 to $300 to your monthly mortgage payment.
Having said that, 20% down payments are becoming less common for first-time homebuyers. There are undeniable benefits to entering the market sooner than later, even if it means carrying PMI for the first few years.
Becoming a homeowner is an exciting milestone. But, navigating the world of mortgages can be a learning curve. While your loan officer will walk you through each step of the process, it's good to learn the basics before diving in.
Generally speaking, a larger down payment means you'll pay a lower interest rate. Why? Paying a sizable sum upfront tells lenders you're a less risky borrower.
How down payment affects monthly mortgage payment
Striving for a low interest rate is in your best interest. The difference of just 1% to 2% can save you a few hundred dollars per month and tens or even hundreds of thousands of dollars throughout the life of your loan.
As we mentioned, putting 20% or more down allows you to avoid paying private mortgage insurance. However, there are benefits to making a smaller down payment, like being able to enter the real estate market sooner.
Some buyers put as little as possible down so they can use their savings for renovations. This can increase your home value and equity, potentially knocking off PMI sooner than later.
Additionally, if you're buying an older house, it's wise to have money set aside for repairs. The cost of fixing a leaky roof or replacing an appliance can be alarming when you're used to renting.
Account for closing costs
A house is one of the biggest and most expensive purchases of your life. To make saving easy, CCCU offers first-time homebuyer savings accounts with excellent dividends, an Oregon state tax break, and we’ll cover your appraisal fee (up to $700) if you get your mortgage through us. Not only that, but we have a range of mortgage tools and lending options with competitively low interest rates.
CCCU proudly serves members throughout the metropolitan area, including Multnomah, Yamhill, Clackamas, Columbia, Washington, Clark, Skamania, and Hood River counties. We have three physical branches in Portland and one in Hood River, convenient mobile banking, plus access to 5,600+ CO-OP Shared Branches and over 30,000 surcharge-free CO-OP ATMs nationwide!
Become a member today or contact us with questions about our mortgage programs.