Ruth Balladares | Stamford Real Estate, Norwalk Real Estate, Greenwich Real Estate

We all know that buying a home is a significant decision that comes with a great deal of financial planning and preparation. However, few of us are taught the ins and outs of actually obtaining a mortgage to make your dream of homeownership come true.

Mortgages are a complicated business that is always changing, both with fluctuations in market rates and with policy decisions.

But, if you’re hoping to buy a home in the near future, it’s important to understand all of your options when it comes to mortgages.

In today’s post, we’re going to address the 20% down payment myth, where that number comes from, and what your options are when it comes to applying for a mortgage.

Where does the 20% down payment number come from?

For most people, 20% of a house is a serious amount of money that would take years to save up. If you’re a first-time homebuyer and don’t have any equity to use from selling another house, 20% may seem like an impossible amount to save within the time you want to buy a home. Fortunately, there are several ways to buy a home without having 20% in cash saved up.

But first, let’s understand where that number comes from.

Most mortgage lenders will want to ensure that lending to you is a safe investment of their money. They want to know that they’ll earn back what they’re spending. To do this, they use several methods.

First, they’ll check your credit history to see how often you pay your bills in time. Then, they’ll want proof if your income and financial stability. Finally, they’ll ask for either a down payment or a guarantee that you will pay them back. Here’s where that 20% comes in.

If you don’t have 20% of the mortgage amount saved for a down payment, you will typically have to pay something called private mortgage insurance. This is an extra monthly fee, on top of your mortgage payments with interest, that you pay to ensure the lender that they’re seeing a return on their investment.

Most homeowners put much less than 20% down

If you’re feeling bad about the amount of money you have saved for a down payment, don’t be! In fact, most first-time homebuyers put, on average, just 6% down on their first home.

Since first-time homeowners don’t have the benefit of equity they’ve accumulated by making payments on their previous mortgage, they often have to come up with down payments out of pocket.

Other options besides a 20% down payment

There are several ways to secure a mortgage without putting 20% down on the home. First, check to see if you are eligible for any loans that are guaranteed by the government. These can come from the Department of Veterans Affairs (VA), or the USDA single-family home program.

The third option is to take on private mortgage insurance until you’ve paid 20% of your mortgage payment.

Private mortgage insurance can be paid to an insurance company or to the federal government in the case of FHA loans, you can put down as low as 3.5%.

Between these three options, you should be able to find a mortgage that you can afford and one that will give you the best possible financial stability in the long-term.

2416 High Ridge Road, Stamford, CT 06903  

Total Rooms
Full/Half Baths
Move right into this newly renovated raised ranch with 3 or 4 bedrooms and 2.5 baths in bucolic North Stamford. Enjoy cooking and serving meals in the newly updated kitchen with granite counter tops and all-new GE Stainless Steel appliances. Other interior updates include refinished hardwood floors, new tile floors and fresh paint throughout. Down the hall, relax under rain-shower in the updated bathroom or cozy up downstairs in the Family Room next to the fireplace. Entertain guests on the Walkout Patio featuring built-in grilling and a spacious level backyard... perfect for play! And take advantage of a versatile Bonus Room that can be used as a guest room, office, gym, or playroom... possibilities abound! Plenty of improvements can be found outside as well, including new paint, new roof, new gutters, and a new garage door to go with the new driveway. This home offers real-value and hassle-free life for years to come in one of the best neighborhoods in Stamford. 5 minutes to Merritt Pkwy and also close to houses of worship, schools and public transportation. This home looking for its new owner, just needs your personal touch to make it your own!

34 4th Street, Stamford, CT 06905  

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LOCATION LOCATION LOCATION - Bright 2 story townhouse located in mid-city cul-de-sac in Stamford. Walk to everything! Open floor plan, large and inviting with warm hard wood floors and freshly painted walls. Kitchen has beautiful granite countertops including a breakfast bar that opens up to the dinning/living room. Upstairs, two generously sized rooms share a bathroom. HOA dues cover heat, hot water and flood insurance among other things. One assigned parking spot and separate storage unit also deeded to this condo, plus plenty of additional parking off-street. Come see it today, you won’t be disappointed!

Applying for your first home loan can seem scary or daunting to many first-time homeowners. However, this process, if done correctly, can save you thousands or tens of thousands of dollars on interest over the lifetime of your loan.

Before you apply for a loan, there are several documents you’ll want to gather and steps you’ll want to take to ensure the application process goes smoothly. In today’s post, we’ll talk about one specific aspect of the mortgage application process--credit scores.

Credit scores may seem confusing. However, since they can so drastically affect your home loan interest rate, it’s important to understand their implications.

Credit checks and mortgages

One of the things that all lenders will want to see before approving you for a home loan is your credit score. If you’re thinking of applying for a mortgage, odds are that you’ve been working to build credit by paying off loans and credit cards on time each month.

The three main credit bureaus in the U.S. are all required to give you a yearly free credit report. This is a detailed document that outlines your lines of credit, payment dates, and amounts. It’s a good idea to get a detailed credit report and check for errors before applying for a loan.

Unlike a hard “credit inquiry,” a free report does not affect your credit score, so you don’t have to worry about dropping a few points by requesting one of these reports.

When applying for a mortgage, however, lenders will perform a hard credit inquiry to determine your borrowing eligibility. This is a part of the pre-approval process and is typically unavoidable.

This is important to note if you are planning on applying to multiple lenders. Be aware that each “prequalification” and “preapproval” may come with a temporary drop in your credit score.

Since credit inquiries make up a total of about 10% of your credit score, these inquiries can make a difference in the short term. For this reason, it’s a good idea to avoid opening new cards or taking out other loans (such as an auto loan or student loan) within six months of your mortgage application.

If you aren’t sure of your current score, you can always check for free from websites like Credit Karma and Mint.

One last thing to note about credit scores and their relationship to mortgages is that most lenders use a specific type of score known as a FICO score. In fact, every adult in the United States with a credit score will have three FICO scores, one from each major credit bureau.

So, when checking up on your credit score, it’s good to remember that each score will be slightly different and your lender’s score may not reflect what you see online.

This listing recently sold for $545,000.

63 Old Highway, Wilton, CT 06897  

Sale Price
Total Rooms
Great home located in SOUTH WILTON. This home has been beautifully maintained and sits on a very private lot. Featuring 4 bedrooms 3 full bathrooms. Living/Dining area with hardwood floors. All bathrooms have been updated. Central air. Family room with fireplace and separate study on lower level. Minutes to transportation and shopping. You will not be disappointed.