How to Figure out the Down Payment

Figuring out the down payment for your new home depends on several different factors. Although there are still a few programs that offer 100% financing, you need to be prepared to put down between 3 and 20%.

To be considered for a low down payment loan, you generally need to have:

• Enough income to pay the monthly mortgage payment
• Cash to cover the down payment
• Cash to cover normal closing costs and related expenses (explained below)
• Good credit score proving your “willingness to pay”
• A good home appraised value, showing that the house is worth more than the amount you want to borrow

Sometimes, you may also need cash reserves to cover two monthly mortgage payments

Closing costs are an added expenses when you close a loan are paid at the time of closing. On average, closing costs amount to 2% to 3% of the house price.

Closing costs include things such as loan origination fee, points, prepaid homeowner’s insurance, appraisal fee, lawyer’s fee, recording fee, title search and insurance, tax adjustments, agent commissions, mortgage insurance (if you are putting less than 20% down) and other expenses.

After you complete an application, your mortgage broker should give you a Good Faith Estimate within 48 hours. In this document, you can clearly see all of your closing costs and how much money you will need the day of the closing.

In the next article, you’ll learn how to be ready and what to expect in Your First Meeting with a Mortgage Advisor