Things You Need to Know About Your Mortgage Down Payment

The down payment that you pay for your mortgage is the 20 percent of your loan’s total value. So if your total loanable amount is $60,000, your initial down payment should be $12,000. That amount will then be deducted to the loanable amount which will bring it down to $48,000. The down payment gets applied to your principal balance which will lessen your monthly loan statement. Some lending agencies do offer down payments for as low as 3 percent, depending on your eligibility.

Coming up with that huge amount can be a problem to anyone, especially if they’re only living paycheck to paycheck. You can try to look for another alternative source of income that can help you the payment. You may try checking your own savings or even grants and gifts from your friends and family.

Making a down payment is a must. Most lenders in all states like Alabama would require the borrowers to pay their down payment. A Down payment actually gives the borrower the incentive to make lower mortgage payments every month.

Some lending institutions do offer lower down payments of at least 3 percent if you’re eligible. That’s why it’s always advisable to shop around and look for the best deals. Trying to look for other lending institutions can also give you a leverage once you go to your lender’s office to get the best deal.

If you can come up with the 20 percent down payment, you need to get a mortgage insurance in order to qualify for a mortgage. There are two major types of mortgage insurance. These are private mortgage insurance and FHA insurance.

Private Mortgage Insurance, or also known as PMI, is paid directly towards the insurance company. These are usually paid monthly although they’re called annual premiums.

FHA insurance or Federal Housing Administration insurance is paid to the local federal government. You have to make a payment for an upfront premium plus the monthly premium payment if in case you decided to an FHA- insured mortgage.

Keep in mind that making a bigger down payment would mean smaller monthly mortgage payments. It may be convenient to get a much smaller down payment, but doing so may only cost your monthly mortgage payment to get high. So if you can afford to make a bigger down payment, please try to do so. This will not only help you decreasing your monthly mortgage payment but will also help you with the interest rates too.

However, you may want to contact a broker if you do have some questions about the down payment’s actual break down. Some states in the U.S. such as Alabama do offer financial assistance programs for citizens who can’t afford to pay a lump sum amount for their down payment.