Archive for the ‘Down Payments’ Category:
Home Mortgages and Down Payments
When you are preparing to buy a home, you usually are not thinking of a down payment. Before you even consider answering an ad or going to an open house you need to think about a down payment. Knowing how much money you have to work with will affect every other decision you make when getting a home mortgage. It will affect and determine everything from your purchase offer, the home mortgages you qualify for, and even how you hope for home mortgage interest rates.
Take a look at your savings and your disposable income. You know your financial status better than anyone, so this should not take long. Determine how much money you have to work with that you could put toward a down payment and closing costs on a home mortgage loan. If you have limited resources, or if you are getting part of the down payment as a gift, your home mortgage options will be very limited. The same is true if you have enough for a down payment but need the lender to cover some of the closing costs, your options will not be very good.
The rules are different if you are borrowing the down payment from your 401k or retirement account. The home mortgage options will vary based on the lender you choose, but they probably will not be all inclusive. Really the only way to have unlimited choices in a home mortgage program is to have enough money for a large down payment and closing costs. In this case you can choose from fixed rate loans, adjustable rate loans, buy downs, graduated payment mortgages and all the varieties in between.
Another important reason to have an inkling of an idea about a down payment is when you are shopping for mortgage interest rates. Some home mortgage lenders will charge a higher interest rate for a smaller down payment. The mortgage interest rate will vary enough as it is, you should be as close as possible on this to get a closer estimate. Not only will you have different mortgage interest rates for fixed rate and adjustable rate loans, but also within those categories the different home mortgages will vary with the rate
If you are shopping mortgage interest rates over the phone, the loan officer will be able to tell you what you qualify for if you know how much of a down payment you have. They will also be able to quote you the right rates. Shopping mortgage interest rates online is also an option, and you have to know what home mortgage programs you qualify for.
It will affect how you write you purchase offer as well. You are required to put down your down payment when writing the offer and different home mortgage programs will have different rules as to how that affects your offer. Down payments are very important to your home mortgage, so being prepared is in your best interest.