How much of a downpayment do you need in order to buy a home in CT?

You may have heard that you need a 20 percent downpayment, a 10 percent deposit,  five percent down, or even less to buy a home. It really all depends on a  number of factors besides your credit-  including your income, your liquidity (or cash on hand), your debt ratio, and what price range that you are looking in.

Years ago, the accepted standard for a downpayment was 20 percent. Prices were also much lower then, and that twenty percent downpayment was a lot easier to attain. We call that percentage a  conventional downpayment nowadays.  At some point a ten percent deposit was acceptable, as long as you paid the bank Private Mortgage Insurance (PMI).  PMI is essentially insurance to cover the bank  in case of a default. When you reach 20% equity and can prove it, you can usually get the PMI removed. For you professionals out there, yes- I am simplifying it for the masses. If and when you have a question about PMI, it's best to contact your mortgage broker or the bank that holds your loan for their policies.

Around twenty or so years ago,  five percent down became an acceptable downpayment, and much more common than one might think. It has been  fairly common ever since. You can also get a government backed loan with as little as 3.5 percent downpayment (FHA). The PMI is necessary for these loans as well, although some loan providers also allow you to opt to pay a one time PMI  fee, instead of monthly, or a combination of the two.

Now that we have the percentages down, you also have to qualify for the loan amount that you are looking for.  Of course, I can give you an estimate, but it really is best to meet  with a mortgage broker  who can guide you in the right direction with the loan amount and type of loan that's best for you. We  post current financing rates here every Friday  and you can check our blog for rates, and you may wish to Contact a Mortgage Broker to get clarity on your particular situation. We happen to like Jennifer Buchanan, among others. See her contact info at the bottom of Every Friday's Financing Update.

If you really think about it, and you were thinking about just renting a home, you may want to consider buying.  In order to rent anywhere, you generally need three months rent to move in. (That's one months rent, and two months security) That number is usually very close, and in some instances MORE than a 3.5 percent deposit. We can always negotiate closing costs, so you may very well be able to buy when you only thought you could rent. Give it some thought.

The rates are historically low, and prices are very good right now. You would be getting in on the ground floor!

If you are thinking about buying and want to browse the MLS, you can do so with unlimited access right here on our site, or if you are ready to look right now, we can get started right away. We 'll get you the best deal whenever you're ready.

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