How to Calculate Your Down Payment

As a Real estate agent, I am constantly asked “How do I calculate my down payment so I can start saving for it?”. This is an incredibly common question!

You are not alone in wondering how to calculate your down payment; hopefully all your questions will be answered by the end of this article.

Let’s start by defining what a down payment is because you can’t calculate it until you know what it is:

Down Payment is the portion of cash paid upfront when financing an expensive purchase such as a house or a car.

Although most buyers know they will need a down payment, most of the time they are unsure how much to save. In the past, I have encountered buyers feeling stressed because they were under the impression that they would need 20% for their down payment.

The Reality is, you will need anything from 0-20% for your down payment, depending on several factors:

1: Your Credit Score

2: Your Income

3: Your debt to income ratio

4. Your desired interest rate

There are some pretty spectacular Home Plus programs that can gift you money, making your down payment as little as 0% out of your pocket. Pretty crazy, right!? Although these programs can be difficulty to qualify for, they can be incredibly useful for buyers with little money in the bank to spare. Some of the lower down payment programs have higher interest rates so it is crucial you choose the program that best fits your long term needs.

Your standard conventional loan can require as much as 20% down! Which, for most first time buyers, isn’t feasible.

Here’s the thing, you can’t figure out what your down payment will be on your own.

I’m sure your head is spinning by now… so how do you figure out your down payment?

It’s as easy as giving your preferred lender a call. Your lender will gather all of your information, from income to debts, and run your numbers. Once they have analyzed your numbers, they will be able to tell you which lending programs you fit into. From there, you will choose which program best fits your needs. Once you’ve picked your program, your lender will be able to tell you how much you will need to save for your down payment.

Bottom line: You can’t calculate your down payment on your own. Call your preferred lender to have them run your numbers (it’s a free process) and they will tell you how much money you will need to save for your down payment.