If you're thinking of buying a house, you've probably heard of the terms "down payment" and "closing costs."
Most first-time homebuyers think these two terms mean the same thing, especially since both involve paying out some cash up front.
But they are not the same.
In this video, we're going to talk about the difference between down payment and closing costs so that you'll know what to expect during the homebuying process.
First up is the down payment. Down payment is a portion of the home's purchase price that you, the homebuyer, need to pay out of pocket. The down payment amount required depends on the type of loan you have.
If you have a Conventional loan, you'll have to give 3% down for first-timers and 5% for experienced homebuyers. But you are also required to have a minimum credit score of 620.
If it's an FHA loan, you're required to give 3.5% if your credit score is 580 or higher. If your score is lower than 580, then you'll have to give 10% down.
Both VA and USDA loans might require 0% down, but they have strict requirements. For example, VA loans only apply to military personnel and their families. And USDA loans are limited to houses located in rural areas.
On the other hand, closing costs are fees associated with buying a home. This includes expenses such as application fees, escrow, property taxes, and underwriting fees. Closing costs would depend on your loan size but are usually about 2 to 5% of the home's purchase price.
Do you have questions about the homebuying process? Need help in getting the home of your dreams? Ebenezer Mortgage Solutions is here for you. Call our mortgage broker today at (813) 284 - 4027.