1. Save aggressively for a down payment. Many first time homebuyers seek a mortgage insured by the Federal Housing Administration (FHA). FHA requires as little as three percent down. But if you do not meet the income and sales price criteria for an FHA-backed loan, you will have to seek a conventional mortgage. To qualify for a conventional loan, most lenders will require you to put down anywhere from 10 to 20 percent of the sales price. So get saving! Read More
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The “gold standard” for a down payment is 20 percent of the home’s purchase price. If you can afford to put down 20 percent, you will avoid paying private mortgage insurance (PMI). Private mortgage insurance insures the lender against possible default.
Borrowers who put down less than 20 percent are considered by lenders as higher credit and default risks. In these cases, borrowers must purchase Private Mortgage Insurance (PMI), and pay for it every month along with their monthly mortgage payment. Read More