| When purchasing a new home, your mortgage options | | | | more on a home purchase. Why? Well, there are a |
| are dependent on a number of factors. Most people | | | | couple of reasons. First, lenders will waive any |
| understand that the down payment is one of the | | | | requirement that you have and pay for private |
| elements, but not why it is important. | | | | mortgage insurance if you put this amount or more |
| A down payment is simply the amount of money you | | | | down. That can save you a couple hundred bucks a |
| put towards a purchase independent of financing. For | | | | month. Second, the magic twenty percent figure |
| many people, it is the money they have saved up over | | | | lowers your risk profile to lenders, meaning a lender is |
| time. These savings can be from stocks, a savings | | | | going to be willing to overlook credit blemishes and |
| account and even a loan from their 401(k) retirement | | | | other "problems" you might have. Finally, a twenty |
| plan. Regardless of the source, the amount of the | | | | percent down payment also creates immediate equity |
| down payment goes a long way towards expanding | | | | in your home. You can access this equity should a |
| or contracting your mortgage options. | | | | financial situation arise where you need cash. |
| In the old days, you could expect a lender to require | | | | Obviously, the vast majority of borrowers do not put |
| you to pay 10 to 20 percent down before they would | | | | 20 percent down. It is no secret home prices are high |
| finance your purchase. These days, this isn't really true | | | | these days. Trying to put 20 percent down on a |
| anymore. From government programs to lenders | | | | $400,000 home means you need to come up with |
| offering unique financing, you can actually buy by | | | | $80,000. That is a big chunk of change for many of us, |
| putting next to nothing down. Many people jump on | | | | particularly first time buyers. In such a situation, you |
| such financing without asking the fundamental question | | | | need to look to other mortgage options. Just |
| of whether doing so is a good idea. | | | | understand you are going to pay more in interest rates |
| In a perfect world, you should put down 20 percent or | | | | and points. |