Buying a house is a major financial decision, one that can put a great deal of stress on an individual. It is essential to do one’s research about the home buying process and ensure that they are neither overspending nor over-borrowing. When people say that they are saving up for a home, they are acquiring funds which they can put forward towards the purchase of their new home. This money which is paid upfront when buying a home is called the down payment. It is a percentage of the total value of the home and calculating the correct amount one should pay as a down payment is essential so that they can be comfortable with their EMI set up.
Your impression on prospective lenders is determined by your outstanding credit. Making sure that your credit score is strong enough to qualify for a mortgage is a very important aspect to keep in mind. Your credit and your down payment are the major factors which affect the price of the home which you can own.
The factors which affect your down payment are the price of the home, the loan amount and type, method of payment, number of payments, interest rate and repayment duration. The bracket of the down payment is 5% to 20% of the home’s sale price. However, any amount lesser than 20% requires mortgage insurance. It is advisable to put down an amount which you can afford and will also leave you with enough funds in the event of an emergency.
Acquiring funds for a down payment can be done in various ways. Selling of current property, inheritances and savings from pay checks are a few of the many ways you could make a down payment. Saving money is the hardest to do. Cutting down on current expenditures and sacrificing some luxuries such as long vacations and lavish meals would go a long way in saving your funds.
If one is unable to save up the 20% of the home price, they can always opt for different ways of -financing their homes. There are plenty of low-down-payment mortgage options. Lower conventional options and FHA and VA loans are also available in these situations as well as zero and low interest rate options.
Making a down payment brings you one step closer to owning your own home and, if done wisely, can be easy and stress free.