From finding a lender to securing a mortgage and finding the right title company, there are several steps required to purchase the house of your dreams. The one aspect of securing a mortgage and a home that some potential buyers find the most confusing is the down payment. If you are considering purchasing a property, here are the answers to some frequently asked questions you might have about a mortgage down payment.
What Exactly Is a Down Payment?
A down payment is simply the amount of a lump sum that you are putting toward purchasing a property. Some mortgage lenders require potential buyers to provide a certain down payment in order to secure a mortgage. Other lenders will provide a mortgage without any down payment at all. The amount of down payment you need to secure is dependent upon several factors, including the lender.
For example, some federally backed lenders do not require any type of down payments, while other private lenders may require you to put down a certain percentage.
A mortgage lender can help you determine if a down payment is required for you to secure a loan and how much of a down payment you can afford.
How Do I Secure a Down Payment?
If you are required by your lender to secure a down payment or you simply want to put a chunk of money down on your home, there are several ways you can get a down payment for a property. For example, some people consider getting a part-time job and putting the proceeds toward a down payment. You may also want to set a certain percentage of your weekly paycheck or salary aside for a down payment.
You can take out a loan with a lower interest rate or even borrow the money from a parent, relative, or loved one to secure a down payment.
Is It Always Better to Pay a Larger Down Payment?
Finally, if have decided to opt for a down payment, you may assume that it is always best to put as much money as possible toward the down payment. While there are benefits to paying a larger down payment, such as more lender options, the ability to get a larger mortgage, or access to lower interest rates, there are instances when you should not put down such a large down payment or skip the down payment altogether.
For instance, if you are going further into debt or simply will have to save for too long to secure the down payment, it is sometimes best to consider a small down payment.
If you are considering purchasing a house, the notion of a down payment can be confusing. Contact a realtor or mortgage lender, if you have any more questions.