Federal Housing Administration (FHA) loans hold a lot of benefits for new homebuyers, which is why they are considered one of the most popular lending options out there. When it comes time to plan out a budget, one of the biggest questions you’ll encounter is “how much should I save for a down payment?”
Down payments are a percentage of the price of the property. While 20% is the standard going rate, lenders will accept much lower down payments such as 15%, 10%, and even 5%. In fact, an FHA loan only needs 3.5% down. Not sure how to calculate it? You can find out by using the following formula:
Cost of the house X 3.5% = Down payment
$350,000 X 3.5% = $12,250
If you haven’t started shopping around yet and you’re not sure what the final price will be, you can still set a budget.
First understand the price range you want to stay within so you don’t break the bank:
Lowest possible price – Highest possible price X 3.5% = Down payment range
$320,000 – $375,000 X 3.5% = Between $11,200 – $13,125
Given that the FHA requires that down payments must be made by the buyer (and not as a concession by the seller), it’s best to save within your desired range as soon as possible.
The FHA also offers an online loan calculator to help you determine the minimum and maximum, so feel free to research different resources online that can help. For more information on the Federal Housing Administration and how they can benefit your financing situation, visit the U.S. Department of Housing and Urban Development (HUD) and view their list of lenders, you’re sure to find a financing option that fits you: https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/lender/lenderlist