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DEAR TZ – CAN I BUY A HOME WITHOUT A LOT OF MONEY TO PUT DOWN?

Money GraphDear TZ,

After reading all of your advice, we’ve decided it’s time to buy a home. We don’t have a lot saved, but we earn enough to qualify for a mortgage. Can we still buy a home? How much money do we need to put as a down payment?

Thanks!

– Doug and Dina Downpayment

Dear Doug and Dina,

You’d be surprised at how little you actually need to put down.  In fact if either of you are or have been in the military, you might even qualify for a $0 money down loan.  Most FHA products require at least 3.5% down.

In addition to this you will want to have money for closing costs (could be up to $10,000 or more in rare cases), like your attorney, home inspector, survey, title insurance, tank search, etc..  In this part of NJ closing costs usually run less than $5000.  Although some loans will include closing costs as an option.

You could also negotiate for a sellers concession.  This would be an addendum to your puFile:Mortgage-green-bay.jpgrchase contract that states the seller will pay a certain dollar amount at the closing.  These funds can then be used to at your discretion to cover closing costs.

Of course if you have more than 3.5% you can put more money down.  If you can afford to put down 20% or more you will avoid paying PMI (Private Mortgage Insurance) which is removed when you have 20% equity in your home.  An appraisal may be required at that time to determine that you have the equity in your home.

Regardless of what you do, you’ll want to discuss this with your REALTOR(R) as well as your Mortgage Representative.  You may also want to consult with your accountant as well.

Best o luck!

– Wayne and Jean

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