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How To Minimize Your Down Payment

A young couple sits in their new home that they purchased with less than 20% down. You can minimize your down payment using these simple tips when buying a home.

As of June 2020, a 20% down payment on a median-priced home in the Bay Area would cost a homebuyer around $228,205. You could minimize your down payment with these simple tips.

Homebuyers don’t have to use a 20% down payment when purchasing a home. However, many choose to do so because a 20% down payment prevents mortgage insurance’s added expense. In general, whenever a purchase’s loan-to-value (LTV) ratio is above 80%, the homebuyer must pay mortgage insurance.

Here’s what down payments might look like for a few different purchase scenarios in Texas and California:

As of June 2020, the Bay Area’s median home price was $1,141,029. 

  • Median home price: $1,141,029
  • 20% down payment: $228,205
  • 3% down payment (conventional loans minimum): $34,231
  • 3.5% down payment (FHA loans minimum): $39,936

As of June 2020, the median home price in Dallas is $226,145.

  • Median home price: $226,145
  • 20% down payment: $45,229
  • 3% down payment (conventional loans minimum): $6,784
  • 3.5% down payment (FHA loans minimum): $7,915

Different down payments allow for a variety of financing options that work for many budgets. If the home you are purchasing is of a higher value, the down payments would be more substantial.

Minimize Your Down Payment

Not everyone has the funds or the budget to afford a large 20% down payment. Fortunately, there are some alternatives for cash-strapped homebuyers who need to minimize their down payment costs.

  1. Homebuyers could choose a loan program that offers a low down-payment requirement and pay for mortgage insurance.
  2. Homebuyers could use gift funds from a family member or other relative to help fund their 20% down payment and avoid mortgage insurance.

Down Payment Questions?

Both of these strategies allow homebuyers to minimize their down payment and reduce their upfront costs when buying a home. The key takeaway here is that homebuyers are not restricted to only putting 20% down. There are many financing options available for your unique home buying situation. Don’t let the 20% down payment scare you away from investing in real estate.

If you would like to learn more about low down payment financing options or discuss your qualification in more detail, you can reach out to one of our expert Client Advisors. Our team is available 7 days a week by email at jvmteam@jvmlending.com or by phone at (855) 855-4491.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167