At Burnett Real Estate Team, one question we often get asked is “how much is my down payment going to be?” Of course, there are many factors that will determine what your down payment will be, and no two home buying situations are exactly alike.
Let’s get down to the details on down payments.
Traditionally, homebuyers can expect to front 20% of the price of the home as a down payment. For example, that’s $50,000 on a $250,000 home in Bentonville. For reference, the median home cost in Bentonville is around $288,000. In that case, you can expect your down payment to run around $57,600. Again, these are basic guidelines and of course, home prices will vary based on several factors.
While 20% is the traditional, standard expectation of lenders, it’s not necessarily the law of the land. However, being able to put 20% down can potentially secure you a lower mortgage payment as well as a lower interest rate than if you were to put down anything less. Additionally, having 20% down will eliminate PMI (Private Mortgage Insurance) which is typically 1.75% of the loan amount per year.
Of course, different home buying situations may call for different terms. In fact, there are a few other methods of securing a home loan that you may qualify for.
Rural Development & VA Mortgages
Didn’t anticipate needing a down payment? You’re in luck, as there may be programs for you. The United States Department of Agriculture offers a loan through its rural development plan that asks for 0% percent down, with interest rates as low as 1%.
Not all homes qualify for the USDA loan, however, as metropolitan areas are generally excluded from USDA program. The RD loan is for rural towns with a certain number of residents and the household income has to be under $79,000. Locally these are towns like Lowell, Springdale, Avoca, etc. Like the USDA loan opportunity, the Department of Veterans Affairs also offers 0% down, low interest opportunities on homes for veterans of the United States military. Eligibility requirements for a VA Home Loan can be found on the U.S. Department of Veteran’s Affairs website.
It’s important to note that with both mortgage opportunities, your eligibility and interest rates are contingent on the health of your credit score. Not every homebuyer will qualify, however. Your realtor will be able to work with you to see what opportunities you may be want to explore.
Federal Housing Administration (FHA) Mortgages
Homebuyers applying for an FHA mortgage can expect to put at least 3.5% down on their new home under the best possible circumstances, and depending on their personal credit score. The seller can contribute up to 6% of the purchase price to cover buyers closing costs and pre-paid items. FHA mortgages require a couple of different things for the home:
- The home being purchased is to be used as your primary residence
- The home being purchased cannot be a multi-unit home with intentions of renting out one or more of the units for additional income
For further information regarding FHA Mortgages, check out the FHA website.
Ready to Get Down?
If you’re considering moving to the Bentonville area, or looking to put down roots, give Burnett Real Estate Team a call! Contact us today and let us help you get down with the house of your dreams.