When preparing to buy a Valencia CA home you may ask yourself: is a big down payment necessary? Certainly there are loans, like FHA loans, that don’t require a large down payment, but for the most part lenders today want to see down payments of 20%. A big down payment can be beneficial as well. A lender is a business person, plain and simple, and the more they see you willing to put in to your investment, the more likely they will be to work with you.
Recently, FHA has changed their lending guidelines and amounts – Please double check with your lender, if you are in the process of home hunting – just to make sure it will unexpectedly impact your home purchase.
The more money you put down on a home the less you have to borrow, which means that your monthly payments will be lower. In addition when you have at least 20% of the cost of the home to put down at closing you typically won’t have to pay mortgage insurance. The more you put down on your home purchase the less likely you are to become underwater on your mortgage.
In some cases you can get into a home with as little as 3.0% down payment – this one is a new conventional product and has it’s place amongst those of you with really High Fico’s and a Low Debt to Income Ratio.
You can also buy a home with a FHA loan at 3.5% down payment. These are Federal Housing Administration funded loans and give great breaks to those of you that may not have stellar credit and a higher debt to income ratio.
If you are a Veteran or currently are in the Military – your down payment could be ZERO, but you are going to have to pay some fees in the ways of closing costs, if they are not picked up by the seller.
Of course – there are other Conventional lending products as well. You could obtain a 5% down payment loan, a 10% down payment loan or a 15% down payment loan as well.
The bottom line is that lenders are happiest with those that can put down the most money toward a home purchase. This happiness transfers into lower interest rates, an elimination of the need for mortgage insurance, and lower overall payments than if you were to finance the entire value of your home. The bigger the down payment the better position you will be in, and since when is that not a good thing?
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