Already on ArticleSlash?

Forgot your password? Sign Up

The Importance of a Down Payment on Your Mortgage


Visitors: 136

When purchasing a new home, your mortgage options are dependent on a number of factors. Most people understand that the down payment is one of the elements, but not why it is important.

A down payment is simply the amount of money you put towards a purchase independent of financing. For many people, it is the money they have saved up over time. These savings can be from stocks, a savings account and even a loan from their 401(k) retirement plan. Regardless of the source, the amount of the down payment goes a long way towards expanding or contracting your mortgage options.

In the old days, you could expect a lender to require you to pay 10 to 20 percent down before they would finance your purchase. These days, this isn’t really true anymore. From government programs to lenders offering unique financing, you can actually buy by putting next to nothing down. Many people jump on such financing without asking the fundamental question of whether doing so is a good idea.

In a perfect world, you should put down 20 percent or more on a home purchase. Why? Well, there are a couple of reasons. First, lenders will waive any requirement that you have and pay for private mortgage insurance if you put this amount or more down. That can save you a couple hundred bucks a month. Second, the magic twenty percent figure lowers your risk profile to lenders, meaning a lender is going to be willing to overlook credit blemishes and other “problems" you might have. Finally, a twenty percent down payment also creates immediate equity in your home. You can access this equity should a financial situation arise where you need cash.

Obviously, the vast majority of borrowers do not put 20 percent down. It is no secret home prices are high these days. Trying to put 20 percent down on a $400,000 home means you need to come up with $80,000. That is a big chunk of change for many of us, particularly first time buyers. In such a situation, you need to look to other mortgage options. Just understand you are going to pay more in interest rates and points.

Raynor James is with - get information on mortgage loans .


Article Source:

Rate this Article: 
Mortgage Loan Payment Calculator
Rated 4 / 5
based on 5 votes

Related Articles:

Importance Of A Real Estate Down Payment

by: Paul Escobedo (January 29, 2008) 

The importance of payment gateways for ecommerce

by: Diane Forster (July 26, 2012) 
(Internet and Businesses Online/Ecommerce)

Mortgage Payment Protection Insurance Or Loan Payment Protection Insurance Can ..

by: Rick Lomas (June 07, 2007) 
(Insurance/Home Owners Renters)

Mortgage Payment Calculator

by: Mark Bennett (July 22, 2008) 
(Finance/Home Equity Loans)

What Should You Do If You Can Not Make Your Mortgage Payment?

by: Nick Adama (August 17, 2008) 
(Finance/Mortgage Refinance)

Home Mortgage Down Payment

by: Alan Lim (June 06, 2007) 

Mortgage Payment Protection Advice

by: Simon Lance Burgess (June 18, 2008) 

Absolute Best Way to Calculate a Mortgage Payment

by: Adam Hefner (July 02, 2008) 
(Finance/Mortgage Refinance)

Why Buy Mortgage Payment Protection? Is it Really Worth It?

by: Jason Davidson (August 04, 2008) 

Mortgage Loan Payment Calculator

by: Robert Grazian (September 10, 2008) 
(Finance/Mortgage Refinance)