[00:00:00] Jessica Quindlen: Welcome back to the Sound Cents Podcast. I'm Jessica Quindlen. Today we're discussing down payments and mortgages. I have with us two of our mortgage loan officers, Gina Allman and Pearl Taylor. How are you both?
Gina Allman: Great. Thank you.
Pearl Taylor: Good. Thank you.
Jessica Quindlen: Awesome. All right, let's jump right in with Gina. What is a down payment? I think we all know a down payment exists when it comes to a mortgage, but what really is going on there?
Gina Allman: Yeah. It's really going to be something, anytime you have a large ticket item that you're buying, such as a home. It's going to be money that you put down, up front, essentially. I like to call it, it's your skin in the game.
So is your skin going to be 3%, 5%, 20%, but it's your own money that you're going to have into the transaction and it's going to give the lender some security knowing that you have some of your own skin in the game.
Jessica Quindlen: Great. I love that. Pearl, what if I don't have enough for a down payment? Can I still buy a house?
Pearl Taylor: Absolutely. The myth of putting 20% [00:01:00] down, buying a home, especially as a first-time home buyer, is not required. You can put down as little as 3% and there's options and different programs such as FHA, conventional loans, VA loans, and CHFA loans.
So there is definitely some flexibility in there. I wouldn't abort wanting to buy a home if you didn't have the funds, and if the funds weren't there, we would be able to get you on the right track to be able to get on that path to buy a home.
Jessica Quindlen: Fantastic. That's exciting. All right, so Gina, I'm in the process. I'm thinking about buying a home, but I have some time. How much should be paid for a down payment? What should I be looking for?
Gina Allman: So, there's no right answer. It's really going to depend on the type of financing that you're taking out. So, your lender's going to define a minimum. Once you identify what type of loan you're going to best qualify for, will determine is it going to be 3% down, such as being a first-time homebuyer for a conventional loan? If we're looking at FHA, your minimum is t3.5% down. [00:02:00] If you're a veteran or active duty and eligible for VA, you could do as little as no money down.
So, it's really going to depend on that along with the property type and how you plan to occupy the home. For example, if you're looking to purchase a rental property, you're going to need a minimum of 15% down. Or a vacation home is then going to require 10% down. But property type also has something to do with it. So definitely consult with your lender to kind of figure out what your minimums are going to be based on what type of loan you best qualify for.
Jessica Quindlen: Fantastic. Thank you. So Pearl, if I'm purchasing a home with someone, be it a romantic partner or a friend, can we both pay for this down payment? Can it come out of two separate accounts, or does it need to live in one place when I pay for it?
Pearl Taylor: No, absolutely. It can come from many accounts as long as it can be sourced, and the funds are acceptable funds and there isn't any tricky stuff or anything like that. It can definitely come from as many of your personal accounts as you would like to use for that down payment. Some people even just end up [00:03:00] consolidating it into one account, so it's easier to transfer that out at closing.
Jessica Quindlen: Fantastic. Awesome. All right, so Gina, when should I start saving for a down payment?
Gina Allman: Well, being a credit union, we think you should always be saving, but really as far out from your desired purchase date as possible. Keep in mind, lenders are going to need to document your funds. So if you're planning on using money that you've saved in cash under your mattress, that's going to need to be seasoned for at least 60 days, so just keep that in mind.
Other factors to consider is think of your timeline when you anticipate to buy, if there's that specific timeframe in mind, start saving well in advance to make sure you have enough for the down payment and other costs because it's not just your money down you need. There's going to be closing costs, potential inspection cost, and then once you own a home, you have maintenance cost. So you really want to assess your full financial situation and see realistically how much you can save [00:04:00] each month as you work towards that goal. and keep an eye on the market conditions as well.
Knowing kind of the potential price range of homes in the area might help you calculate the minimum down payment that you need.
Jessica Quindlen: Great. I love that. All right, so let's keep up this savings conversation Pearl. What are some tips to save for a down payment?
Pearl Taylor: I would probably start with setting an actual goal to see how much you want to start saving and then create a budget from there. Some people take a second job, like your ride shares or deliveries, save that cash. Some people are saving tax refunds. Maybe lower your subscriptions cost and cut back those unnecessary expenses, and also a huge thing that a lot of buyers are doing is getting gifts from family members. And also another option is checking with your 401K company to see if you could possibly get a withdrawal from there. People are getting that to use for their down payment up front as well. [00:05:00]
Jessica Quindlen: Fantastic. All right. Anything else to wrap up our down payment conversation?
Gina Allman: If you're in the market to buy or want to get more information on becoming a homeowner, check out the link in the show notes and we'd love to help.
Jessica Quindlen: Fantastic. All right. That brings us to the end of our show. Gina Pearl, thanks so much for being here. It was great to have you.
Gina Allman: Thank you.
Pearl Taylor: Thank you. [00:06:00]
Jessica Quindlen: Thank you for listening to Sound Cents from Ent Credit Union. Be sure to follow our podcast as well as rate and review us. I'm Jessica Quindlen. I will see you next week. Same time, same place.
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