How Much Money Should I Plan on Putting Down?

One of the first things a home buyer thinks of or plans on when preparing to purchase a home is, how much money will need to be put down to buy the home.  From about 2003-2006, no money down loans were a dime a dozen and very few home buyers were putting money down even if they had substantial money saved up.  Well after the mortgage meltdown of 2007-2008, the 100% financing or no-money-down loans are a thing of the past; for most home buyers.

Veterans and those using a VA home loan for the purchase of their house, still do not have to put any money down when purchasing or buying a home whether getting a Texas VA loan, Florida VA loan, or any other VA loan type.  Just because veterans are not required to have money to put down and are able to borrow the full sales price of the home, doesn’t mean it is always in the veteran’s best interest.  There are reasons to consider for making a down payment on a VA loan.

VA loans do not require mortgage insurance (PMI) and this is the main reason people would be interested in putting money down on a home purchase; by putting money down you can in many cases avoid paying mortgage insurance.  So if VA loans do not require the payment of a monthly mortgage insurance, then why would a veteran want to put money down?  Below is a list of some reason or options to consider for making a down payment on a VA loan.

Reasons to consider for making a down payment on a VA loan or VA home purchase:

Make your monthly payments on your mortgage smaller.  (budgeting) By putting money down, a veteran is able to control more of the monthly mortgage payment that will be due each month.  Suppose you are buying a home for $250,000 and your rate is 6.5%.  Your monthly payment, if you did not put any money down, would be $1580.00 (PI only).  Putting down 20% or $50,000 would lower your monthly PI to $1264 and save you $316 a month.  These examples do not take into account your VA funding fee.
Pay a lower % on your VA funding fee. (lower your closing costs) The amount of money a veteran puts down on a VA purchase, will affect the amount of the VA funding fee charged by the department of veterans affairs and also has an impact on the monthly payments for the VA loan.  To fully understand how your VA funding fee will affect your VA loan please click here.  Just like a down payment will lower your monthly payment purely mathematically, a VA funding fee will also affect the final loan amount and thus have an impact on your overall monthly payment.
Emotional satisfactions of having some instant equity in your home. When a veteran doesn’t put any money down on the purchase of a home, the veteran will not have any equity in the house.  Knowing you have skin in the game and that you owe less on your home than what it is worth goes a long way in making you feel good, responsible and you also have given yourself more peace of mind.
Possible lower interest rate. Though most lenders or mortgage companies that work with veterans and do VA loans will not give lower rates or incentives for veterans that put money down, it has happened in the mortgage industry that a lender may be more willing to give a lower rate to a veteran that has shown responsibility in saving money and putting it down on the home.

One thought on “How Much Money Should I Plan on Putting Down?

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