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Understanding Mortgage Down Payments

162961954.jpgLoan Officer Spotlight: Understanding Mortgage Down Payments

When determining a buyer’s qualification for a home loan, the down payment is an important piece in calculating ability to qualify for financing. The down payment for a mortgage is the difference between the sales price and your new loan amount. This money, along with the loan proceeds go to the seller as payment in full for the property. The amount or percentage of your down payment will influence:

• The type of loan program you can qualify for
• Your interest rate, since a lower down payment will usually have a slightly higher interest rate
• Whether or not you will pay mortgage insurance (PMI), which is typically not required with 20% or more down payment
Down payment requirements vary depending on the loan you qualify for. For instance, conventional financing is available with as little as 3% down, however, it will require a hefty mortgage insurance premium to offset the lender’s risk of approving a loan with such a low equity position. Government insured loans, such as FHA, are available with 3.5% down, have very favorable rates and allow for more flexibility in qualifying. This program has two mortgage insurance premiums and you will pay this for the life of the loan. VA, on the other hand, is available to most Veterans with zero down payment, and like FHA, allows for more flexible underwriting. The sources of your down payment can be:

• Your own savings or checking
• Proceeds from the sale of other real estate
• Gifts from employers, nonprofits or family members
• 401k or retirement accounts
In the end no matter what the minimum down payment requirements are, you have to decide if putting more down is in your best interest, especially if you are leaving yourself with very little in reserves after your new home closes. Your loan officer can guide you through all the in’s and out’s of different scenarios and help you to arrive at a decision that is good, not only for your wallet, but for your peace of mind.

Linda.Bertuzzi.pngLinda Bertuzzi

Branch NMLS#777362
Website: Click here

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