You’ve probably shortlisted a recent sell listing of a house from a reputable company that says “we buy houses in NJ” and decided to go for it. While buying a home is a highly exciting process, there are lots of things that you need to take care of to make the entire process a smooth one. Among many other things, arranging for the down payment to finalize the deal is the first and most important thing you need to consider.
This post would help you gain a clear idea of down payment no matter if you’re buying the house from a company with the tagline “sell my house fast NJ” or from one that’s a leading name in “we buy houses in NJ”.
Understanding a Down Payment
In simple words, a down payment is a percentage of the purchase price of the home that you’ll pay during the sales transaction. For instance, if your home’s purchase price is $200,000 and you plan to make a down payment of 20%, you’ll initially have to put $40,000 down and the rest you’ll borrow from a mortgage lender. Making a down payment also increases your credibility as a serious homebuyer to your mortgage lender.
How to Arrange Funds for a Down Payment?
Even if you’re buying the house from a top-tier “we buy houses in NJ” company that has joined hands with some reputable mortgage lenders, you must have the funds to make the down payment and take care of other closing costs. So, the biggest question stands as how you can arrange the money.
If you’ve got generous relatives who’ll send you gift money to make the down payment, you’re lucky enough. However, there’re factors you need to consider when using gift money so be sure to check them out. But if you don’t, you need to arrange the funds on your own. While this is certainly an uphill task to accumulate such a large amount, there’re ways to make it a little easier.
You can explore these strategies.
- Postponing vacations and major discretionary purchases
- Selling unneeded/unused items
- Automating deposits into a fund that you’ll only use for making the down payment
- Starting a side hustle to earn extra
How Much Should You Put Down As Down Payment?
While the usual average down payment amount is 20% of the purchase price of a house, a recent survey from the National Association of REALTORS® that it comes down to 6% for first-time homebuyers. However, the amount you’d need to pay as the down payment depends on various factors including your DTI or debt-to-income ratio, specific requirements of your lender, your credit score, etc.
It’s important to understand that taking out a smaller mortgage loan means making a larger down payment. Also, if you’ve got a marginal credit score and lots of debt, you may need to make a bigger down payment even if you’re buying the house from a leading “sell my house fast NJ” company. Keeping all these things in mind, planning ahead and starting saving up for making a standard down payment seem to be a prudent decision.