Every home purchase requires that the buyer make an initial down payment. The amount of this down payment will depend on the current financial situation of the buyer as well as the value of the home itself. Typically, 3-20% of the home’s value will be paid upfront when a person buys a home.
The down payment amount will affect all future payments. When speaking with a mortgage lender, it is important to figure out the ideal loan amount to down payment ratio to ensure that the individual will be able to afford the mortgage payments. This will also involve discussing other debts and priorities while establishing how the home will be purchased.
The more a person can afford to pay in a down payment, the smaller a loan will need to be. There are many benefits to having a large down payment. A person who makes a large payment shows financial stability and they may be awarded with a low interest rate, low monthly payments, and, if they choose, the ability to pay off the mortgage faster.
Saving for a down payment early will give individuals a tremendous advantage and allow them to make a large initial payment. Some people choose to put their money into a high yield savings account, therefore accumulating interest on the money they are saving for their initial down payment.
Unfortunately, even individuals who plan well can find themselves in serious financial trouble, and may run the risk of losing their homes to foreclosure. However, through mortgage modification, these individuals may be able to avoid foreclosure and keep their homes.
By Martin Fisher