Monday, January 17, 2011

Down Payments

Here's what you need to know about down payments:

How is the down payment determined?

• Type of loan
– Conventional (non-government)
– FHA
– VA
• Type of occupancy
– Primary residence
– Second home
– Investment property

How much is the down payment?

• Conventional loans
–Primary residence = 3%
–Second homes = 10%
–Investment properties = 15%
• FHA loans
–Primary residence ONLY = 3.5%
• VA loans
–Primary residence ONLY = 0% (100% financing)

What about mortgage insurance?

• Conventional loans
–With 20% down, there is no mortgage insurance
• FHA loans
–There is always mortgage insurance for the first 5 years, regardless of the size of the down payment
• VA loans
–There is never any mortgage insurance

Why pay more than the minimum for the down payment?

Conventional loans
• The interest rate is cheaper if the down payment is 5%, rather than the minimum of 3%
• Mortgage insurance is cheaper
–3% down = most expensive
–5% down = less expensive
–10% down = even less expensive
–15% down = even less expensive
–20% down = no mortgage insurance
• Lower loan amount = lower mortgage payment

FHA loans
• Mortgage insurance is cheaper if the down payment is 5%, rather than the minimum of 3.5%
• Lower loan amount = lower mortgage payment

Things to consider when deciding how much to put down

• How much money do I have?
• How big a mortgage payment can I afford?
• Do I want to avoid paying for mortgage insurance?
• Is it more important to me to have equity in my house, or cash in the bank?

Want to watch our video of this tip? Check it out on our web site by clicking here.

Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.

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