Buying a Home: Your Down Payment


When people buy a home, the first thing they do is look at for-sale ads in newspapers or the internet. Some contact a trusted real estate agent to find a home for them. The next thing you should do before considering a home is to examine your savings. Determining how much money you can put into your down payment affects almost all aspects of buying a home.

If your savings is barely enough for a minimum down payment, you will have fewer loan or mortgage options available to you. Lenders are usually more strict with those who can only give a small down payment, especially when you need to conform to their underwriting guidelines. Larger down payments allow you to choose between fixed rate loans, graduated payment mortgages, adjustable rate mortgages, and varieties of each type. Lenders might also make some exceptions to the rules.

Your down payment will also affect how you write your offer. You’ll be required to put your down payment information in the offer, and different loan programs have rules that affect how you write your offer based on your down payment. Some loan programs also charge higher interest rates for those who can only give a small down payment. Lenders also allow sellers to pay lower closing costs for small down payments than for large down payments.

How much you can afford for your down payment affects your loan or mortgage options. Make sure you figure out how much money you have for the purchase before making the next step.

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