Finding a Home
Financing a Home
Closing on a Home
Down payment and how much can I borrow?
Make sure you understand down payment requirements and how banks decide how much to lend you before making a decision on how much to borrow. In some cases, it is not advisable to borrow all of what you can afford.
Determine your down payment
Your down payment is the money that you pay toward the cost of your new home at the time of purchase. You borrow the rest from the bank as a mortgage. Required down payments could start as low as 5% of the purchase price of the home. A mortgage from the Federal Housing Administration (FHA) could require just 3.5% and a mortgage from the U.S. Department of Veterans Affairs (VA) may not require any money down.
Three common ways of funding a down payment:
Private Mortgage Insurance (PMI)
If your down payment is less than 20%, you may be required to pay Private Mortgage Insurance. This will be added to your monthly mortgage expense but can be eliminated once your mortgage balance reaches 80% of the original amount.
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