Answering All Mortgage Application Questions For A Home Mortgage Guaranteed
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by: marciafreeman
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Its not always easy to save up enough to make the traditional 20 percent down payment on a home. The good news is that there are quite a few low down payment mortgages available nowadays. When deciding on a mortgage plan to go for however, you should determine if 20 percent is indeed the standard rate.
In order to qualify for a conventional mortgage, lenders usually require a minimum down payment of 20 percent. If you put down less than 20 percent, most lenders will require you buy Private Mortgage Insurance (PMI). This insurance typically costs about one half of 1 percent of the purchase price of the home and protects the lender in the event that you should default on the loan. You will therefore end up avoiding having to pay the PMI costs...and thereby save more money...if you can manage to raise the 20 percent down payment.
What if you put down less than 20 percent? If you are unable to make the 20 percent down payment, purchasing PMI may be your next best option. The good news is that you may be able to get the mortgage lender to cancel PMI when you attain 22 percent equity in your home, or even 20 percent equity if you have a good record of making payments.
An alternative is to apply for an 80/10/10 loan. This type of loan will save you from having to purchase PMI by paying half of the 20 percent down payment with another mortgage plan. The way it works is that 80 percent of the purchase price of a home is financed through a first mortgage, 10 percent through a second mortgage, with the final 10 percent coming from the down payment. You may also pay off the 20 percent down payment with an FHA loan that you secure from the government. Again, you will have to pay for insurance, but you may qualify with a down payment as little as 3 percent.
What about the possibility of purchasing your home without having to make any down payment at all? It is possible to finance 100 percent of the purchase price of a home with a mortgage that requires no down payment at all. The disadvantage of this type of financing is that you are likely to be charged a higher interest rate than that of a standard mortgage. This will of course result in higher monthly payments for you. Also, because you didnt make the standard 20 percent down payment, you will have to pay PMI.
Lets review the options. When trying to determine how much to put into the down payment, you should explore your various options in order to find a plan that will best suit your circumstances.
Q: Would you prefer getting instant equity in your home and lowering your monthly mortgage payment? A: Then putting down 20 percent may be best for you.
Do you want to save on paying PMI costs but are unable to raise the 20 percent down payment? A: Then you may want to consider an 80/10/10.
Q: Can you only come up with a 3 percent or 5 percent down payment and dont want to wait to buy a home because you are concerned about rising house prices? An FHA loan secured from the government may then be your best course of action.
Are you unable to raise enough money for any down payment but are willing to incur the extra expense of a no down payment mortgage plan? A: Provided you are able to handle the required payments and are confident your financial situation will enable you to refinance for a mortgage with better terms in the future, it could be the way to go. When going for this option however, it is important to assess your finances thoroughly with regard to how much down payment you are able to pay. More Reading Refinance rates - Loans -
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Read more about mortgage refinancing, go to www.getsmart.com/refinance.
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