If you want to buy a house, you're going to have to put a significant amount of cash down in most cases. The total amount you have available to give as a down payment could affect your interest rate or even your general eligibility for the loan. Know the minimums in advance of shopping for a home loan.
Why Do You Need a Down Payment?
The lender asks for a down payment because the mortgage company's investors want you to invest in the transaction as well. When you put money down, you've immediately established equity in the house (the difference between the mortgage balance and the market value of the home).
How Much?
The common percentage you need to put down to buy a house is between 10 percent to 20 percent. If you go for an FHA (Federal Housing Administration) loan you might be able put down as little as 3.5 percent. Use these minimums as a guideline, because each lender's rules and the borrowing situations vary. The exact amount the lender requires also depends on your credit score and profile.
Earnest Money
Another amount you need to put down to buy a house is earnest money. This is a deposit you issue to the seller to show that you're serious about purchasing the home. The common acceptable amount to put down as an earnest deposit is between 0.5 percent to 1 percent of the proposed purchase price. Your real estate agent informs you of exactly how much earnest money you must put down to buy a home.
Saving
Start saving for a down payment at least a couple of years before you start shopping for a home. Cut costs and put the money into an interest bearing savings account, like a CD (certificate of deposit). You also have to prove to a lender where you get the funds for your home down payment. Acceptable sources of down payment money for a mortgage loan may include your own personal savings, a retirement account, a family member or a down payment assistance program.
0 comments:
Post a Comment