Franklin Financial Group Blog

If you are looking to purchase real estate you should anticipate putting some money down for the transaction. The days of 100% financing for purchases have almost become extinct. If the purchase is for an investment (non-owner occupied) property, you definitely will have to come up with some money to put down. If the property is a 1-2 family home I suggest preparing to put at least 10% down. If the property is a 3-4 family home I suggest preparing to put at least 15-20% down. If you are purchasing a home you intend to live in(owner occupied or second home) and it is a 1-2 family home I suggest preparing to put 5-10% down, or 10-15% a 3-4 family home.

Banks are looking to minimize their risk, especially during these times, and want buyers to have something invested monetarily in the deal. If you have some of your own money tied up in a property, theoretically you are less likely to foreclose on the property.

We were spoiled for many years of having mortgage programs available that allowed no money down on a purchase. There are still a few lenders offering these programs, but the guidelines are much more stringent, and a higher rate with the program is designed to offset the risk. Some down-payment assistance programs still exist which make it essentially like you are coming up with no money of your own up front. Nothing is free however so if you are assisted with a down-payment you probably are paying more for that option in some way, often by paying more for a home than you otherwise might if no down-payment assistance was required.

Putting money down not only lowers the bank's risk, but it also offers you a lower monthly payment. The more you put down, the lower your payment will be. So if you are thinking of buying some real estate now or in the future, begin saving money each month, and as much as you can. The more you have to use if necessary the better off you will be when it comes time to buy.