When you’re ready to buy a home, one of your first orders of business is to contact a local mortgage company to begin the application process. One of the questions you may have at the top of your list is whether or not you have saved enough money to make an adequate down payment. Depending on the mortgage program you choose, your minimum required down payment may range from 0 to 20 percent of your home’s purchase price. However, depending on how the home will be occupied, you may need to make a down payment that is larger than the amount usually required.
Most lenders will ask about your intended occupancy type during the application process. If you are planning to use the home as your primary residence, your required down payment will likely be as low as the lender’s program will allow. However, if the property will act as a vacation home or a rental property, the lender may require a larger down payment. The reason for this difference lies in your likelihood and ability to pay off the loan. This is to protect against defaulting on a mortgage if it is secured by a second home or a rental property.
Do I Have to Live in the Home Forever?
If you purchase a home with the intent of using it as a primary residence, the loan’s occupancy clause won’t require you to live in the home indefinitely. In general, most lenders will expect you to remain in the home for at least one year. However, if you must move out during this time because of an unavoidable situation, such as a job transfer, lenders will typically understand. If you must leave the home before you have met the terms of the occupancy clause, it is advisable to send a letter of explanation to your lender.
For more information about required down payments and occupancy requirements, contact us at Starboard Financial. We are a respected local mortgage company, and we are happy to help you throughout the entire mortgage process.