Mortgage Loans (Part 3)

DOWN PAYMENT

In this part, I will discuss for you about the down payment which presents the biggest obstacle to home ownership for buyers. But sometimes, lenders become more willing to underwrite with small down payment.

All of lenders require a cash down payment for them from 5% to 10% or 20% of the sale price. But some lenders get 0% of down payment. if you can have the down more than your lender requires, you may tell them 25 or 30%, and your lender will be willing to overlook credit blemishes and approve your loan without verifying your income. And if you come up short on the down payment which is less than 20%, before your loan is approved by the financial instituation, you may have to obtain private mortgage insurance to protect for lenders.

You can be lower your down payment or afford a more expensive house by putting more money down. Your maximum monthly mortgage payment is 28% of gross income, the bigger down payment, the more expensive house you can buy, and you will have the better house or dream house. If your down payment on a home is less than 20% of the appraised value or sale price, you need to obtain the mortgage insurance.

The mortgage insurance is known as the private mortgage insurance to distinguish from FHA and VA insurance which is run by government programs. The cost of mortgage insurances depend on the size of down payment and the loan which you borrow from financial institution, but it amounts to about one half of 1% of the loan.

But with the mortgage insurance you pay the premiums but the lender is the beneficiary. The coverage insure the lenders against default by the borrower. If you stop paying on a mortgage, the insurance company will ensure that the lender will be paid in full. The mortgage companies pick insurance providers for their customers, but the borrower have to foot the bill. And usually they do so in monthly installment. But some lenders offer programs, so they pay the entire insurance premium in a lump sump at closing.

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