Purchasing a home generally will require a down payment in the form of cash. Where will you get the cash needed to make this down payment? How much is your down payment going to be on the home of your dreams? Let's take a closer look at these questions.
How much you are required to put down, as a down payment, on a home is going to depend on a few factors. These factors include: the total purchase price of the home or property, the interest rate, how much of a payment you can afford every month, the amount needed by the lender to reflect your 'financial interest' in this property.
Lenders often require a down payment on a real estate transaction because these are larger type loans. The main reasoning behind a down payment is that, if you have a financial interest in the property you are going to take 'better' care and maintenance of the home or property over the life of the mortgage loan. Lender will offer a lower interest rate with a larger down payment and vice versa, a higher interest rate with a lower amount of down payment.
Where to 'find' cash to make the down payment
- Money can be accessed through equity lines you own in other properties or in this property if you are using a refinancing mortgage or a home equity loan.
- You can access money through the cash lines on your credit cards to meet the demands of a down payment on a property or home.
- Borrowing money from friends or relatives is an option that many first time homeowners will look at when obtaining a mortgage.
- Take money from your savings or checking account to pay the needed down payment amounts when obtaining a mortgage.
Personal loans that are unsecured are options when you need a down payment on a home for a mortgage loan.
Credit lines through business methods are additional means of cash that you may have access to when seeking a mortgage.
Take a loan out against your life insurance policy. If you have been paying into your life insurance for a few years you could have equity there as well.
Take money from your retirement account. If you have been paying into your account for a few years, you could have a substantial amount. There will be penalties and fees, but you will need to compare this to the possible savings of interest over the life of your mortgage loan to determine if this is a method of down payment for you.
When you are determining the amount that you need for a down payment, be sure to use the online free calculator to help you find the down payment that will fit your budget as well as with an end result of a payment that you can afford monthly. The larger the down payment the better chances you will have in obtaining a low interest low payment mortgage loan.