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Mar 30 2022

Game Plan Your Down Payment Amount on a Home Purchase

Buying into a primary or investment home purchase takes some planning. Most programs require some amount of down payment. The VA offers loans down to 0% if you are or were a member of the military, and even FHA loans can require a lowly 3.5% minimum down payment. These are government programs, however, and may only be used to purchase a primary dwelling. Furthermore, if you do not have VA status, or you can’t qualify for an FHA loan, then you will be relegated to a minimum of 10%… most likely 15% down payment. Check out the basics for planning your next home purchase.

Home Loan vs Home Purchase

A home loan is only a percentage of the actual home purchase price. Therefore, determine the loan value that you want or can afford. From there, you can plan on saving up how much down payment you want for your future purchase. If you already own a home, you can calculate how much of your home equity is worth investing into a rental property.

Calculating a Purchasing Power

The first step is to determine how much money you would like to borrow. I used an example of $350,000 in the video. Loan-to-Value (LTV) is the key phrase. Below are a few equations to demonstrate how to use LTV and loan amount to determine what your purchasing power would be for a new home.You must DIVIDE the amount of loan by the LTV PERCENTAGE to know your PURCHASING POWER. Simply subtract your purchasing power from the loan amount, and you will see how much down payment you must bring to the table for that home purchase. 

Loan amount: $350,000

85% LTV (15% Down)

$350,000 / 0.85 = $411,764 Home Purchase ($61,764 Down)

 

70% LTV (30% Down)

$350,000 / 0.7 = $500,000 Home Purchase ($150,000 Down)

 

97% LTV (3% Down)

$350,000 / 0.97 = $360,824 Home Purchase ($10,824 Down)

Home Loan Minimums

Many home loan programs in Colorado and Idaho have a minimum loan amount for borrowers who cannot qualify for standard loan programs. Most Non-Qualified Mortgage loans (Non QM) start at a $100,000 minimum loan amount. They also typically do not exceed 90% loan to value. This means that you may have scraped by, saving to buy your first home, and finally have $6,000 to put down on a $60,000 house. Well in these states, unless you qualify for a conventional, FHA, VA, or USDA loan… you won’t be able to buy that house, not because of you, but because the loan doesn’t qualify. You would have to find a home that costs at least 10% more than $100,000 just to have a home that qualifies for the loan. This is another reason why it’s important to understand how to game plan for a down payment.

Game Plan Your Future Home with a Mortgage Broker.

Herein lies the benefit of working with a mortgage broker well before you start shopping for a home. Mortgage brokers know the many different loan programs that exist out there. They can easily look at your current situation, at no cost to you, to help you understand where you are at. Furthermore, brokers are not allowed to receive any compensation for mortgage business until after the loan closes, so we are more than happy to walk you through this process. Remember, whatever your situation, there’s a Juicy Solution waiting for you. I’d love to work with you and help you reach your home dreams. A Jewish proverb states, “Good planning and hard work lead to prosperity” (Pr 21:5)  Your dreams are worth it, so be wise, and start planning now, so that your hard work may conclude with a prosperous result.

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DOWNLOAD | GUIDE TO HOME LOAN PROGRAM BASICS FOR MORTGAGE LENDING