Do I have to have a certain amount of money as a down payment?

Asked by Mike, Indianapolis, IN Tue Jan 20, 2009

I am just wondering cause Im looking to use 25000$ to get started in a home in this neighborhood

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Tom Vornholt, , 46181
Tue Jan 20, 2009
You do not have to have a certain amount of money down past the 3% (FHA) . But if you are wanting to put $25,000 down, you will be putting 20% down at the current list price (you can probably netgotiate a little lower) and that will keep you from paying the PMI (Private Mortgage Insurance) monthly fee. If your credit score is good, you should be able to be a top candidate for a loan. The best way is to go to your local lender and get a pre-approval setup and that will help you to know what are your loan limits. That will be one of your most valuable tools in making offers.
Good luck and make sure you connect with a knowledgeable realtor.
2 votes
Martin Walli…, , 46703
Tue Jan 20, 2009
Mike: That depends on how much of a monthly payment you can comfortably afford (and qualify for when applying for a mortgage). For example if you paid full asking price on the property you're looking at (124.9) and 30 year fixed mortgage interest rates are at 5%...
a zero down mortgage would cost you $671 per month P&I.
With 3% down your payment would be $650.
With 10% down your payment would drop to $604 and if you
put 20% down your payment would be only $537.
These payments reflect P&I only and do not include taxes, insurance or PMI if applicable.
Even though your payments would be significantly less with the larger down payment, there is only a $130 difference between the 3% and 20% down payments.
What I would consider is what other investment(s) could I purchase with my money if I only put 3%, 5% or 10% down on this house and used the rest to invest in another asset.
For example, what if you bought a second house and used it as a rental property... generating positive cash flow, annual depreciation allowances, interest deductions and built up equity during ownership. run the numbers to see what provides the best return on your investment dollars.
If you have any questons or would like more information about this idea, please email me.

Marty Wallinger
1 vote
Brad Osborne, Agent, Greenwood, IN
Tue Jan 20, 2009

The amount of money you need for down payment will depend on the loan you decide to go with. FHA requires as little and 3 percent while a conventional loan would require around 10 percent. I am a Realtor in Greenwood and would be happy to get you in touch with a Mortgage Rep I work with and help you in purchasing this home if you are not currently working with a Realtor.
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Tony Grego, , Indianapolis, IN
Tue Jan 20, 2009
Thanks for your email.

First the bad new, unless owner financed most lenders require a down payment in today's financial market.

Now the good news. When you use FHA has a backer of your mortgage you may qualify with as little as 3% down. With the property you have selected you will need in the area of $4k. Down.

Now FHA does offer great rates. To get an idea you can see them at my website at

Please let me know if you have any additional questions.
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