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All About Down Payments

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An important aspect of getting a home loan is saving money for your down payment. You have many choices to make your home more affordable to you.

Lenders used to require a down payment of at least 20% of the home’s price. These days, however, many lenders offer flexible home loan programs allowing you to put very little down — 3.5% percent or less of the home price. For some buyers it used to be possible to buy a home with no down payment at all, or to receive help from local down payment assistance programs. With the recent problems with the mortgage industry, 0% down loans are no longer available.

If you decide to pay make a down payment less than 20 percent, your lender may require Private Mortgage Insurance (PMI), which protects the lender in case you cannot repay the mortgage. Anothe option may be to take out a second loan. Another option may be an FHA loan. For instance it is possible to put 10% down, take a second loan for 10% (usually at a higher interest rate) and have a first loan for the traditional 80%. Talk with your mortgage professional to find out the right deal for you.

You’ll also need to pay for closing costs, which are costs associated with initiating a loan. These can include loan origination fees, discount points, attorney fees, recording fees and pre-paids. They are generally about 1% for a buyer not including discount points. Whether or not discount points make sense for you depends on whether you have the funds to buy points, and how long you intend on owning the home.

Once you have you down payment and loan pre-approval, it’s simply a matter of finding the right house. Please call or email when you’re ready to take this next step towards owning your own home.