In any home loan situation, the down payment is often one of the most important factors. The down payment is the amount of cash you put down right away for a mortgage, and is often expected to be a percentage of the total loan principal.
Down payments can be daunting for some people, but we’re here to help at Primary Residential Mortgage. Here are some basics on down payments, including ways you can lower the down payment in exchange for other concessions within the mortgage process.
In most conventional loan situations, the down payment that’s expected for a mortgage will be 20 percent. For a home that costs $300,000 total, for instance, the down payment will be $60,000. The ability to pay this amount up front increases your chances of being approved for the loan in the first place, and helps you get the best rate possible.
You can also usually pay lower fees throughout the mortgage life if you pay the full down payment. Perhaps most importantly, you also avoid costly mortgage insurance that is often required if you’re unable to put the full 20 percent down.
For those who may struggle to come up with a 20 percent down figure, there are options to reduce the payment number. FHA loans, backed by the Federal Housing Administration, get down payments as low as 3 percent in some cases. Other government-sponsored loans will offer lower down payments. In addition, programs for service members and people living in rural areas are options if you fit these descriptions.
It’s important to remember other fees that might come along with lower down payments in some cases. There will often be a higher upfront fee, and as we noted earlier, you may have to pay private mortgage insurance so your lender is covered in case of a default. You also may pay a higher interest rate. This is still financially beneficial for many people, but in some cases, simply paying the down payment amount is actually the more prudent move.
For more on down payments, or to find out about any of our mortgage services, speak to a mortgage broker at Primary Residential Mortgage today.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of Primary Residential Mortgage, Inc.