When preparing to buy a home, the first thing many homebuyers do is look at the real estate ads in newspapers, magazines and listings on the Internet. Some potential buyers read how-to articles like this one. The next thing you should do - before you call on an ad, before you talk to a REALTOR®, before you shop for interest rates - is look at your savings.
Because determining how much money you have available for down payment and closing costs affects almost every aspect of buying a home - including how you write your purchase offer, the loan programs you qualify for, and shopping for interest rates.
If you only have enough available for a minimum down payment, your choices of loan program will be limited to only a few types of mortgages. If someone is giving you a gift for all or part of the down payment, your options are also limited. If you have enough for the down payment, but need the lender or seller to cover all or part of your closing costs, this further limits your options. If you borrow all or a portion of the down payment from your 401K or retirement plan, different loan programs have different rules on how you qualify.
Of course, if you have enough for a large down payment, then you have lots of choices.
Your loan choices include such varied programs as conventional fixed rate loans, adjustable rate mortgages, buydowns, VA, FHA, graduated payment mortgages and all the varieties of each.
Shopping for Rates
A very important reason you need to have at least some idea of your down payment is for shopping for interest rates. Some loan programs charge a slightly higher interest rate for minimal down payments. Plus, the interest rates for different loan programs are not the same. For example, conventional, VA, and FHA all offer fixed rate loans. However, the rates vary from one program to another.
If you shop lenders by phone, the loan officer will be able to tell you which programs fit and quote your rates accordingly. However, if you are shopping on the Internet, you have to develop some idea of your loan program on your own.
Writing Your Offer
Another reason you need to have a clue about your down payment is because it affects how you write your offer to purchase a home. Not only are you required to put your down payment information in the offer, but also different loan programs have different rules that also affect how you write your offer. This is especially important when dealing with FHA and VA loans.
If you are asking the seller to pay all or part of your closing costs, you have to be certain your loan program allows what you are asking. For smaller down payments, lenders allow the seller to pay less closing costs than for larger down payments. Some loan programs will allow a seller to pay certain types of costs, but not others.
Finally, your down payment also affects your ability to qualify for a loan. When you make a small down payment, lenders are fairly strict about having you conform to their underwriting guidelines. For larger down payments, they will tend to make allowances or exceptions to the rules.
As you can see, the down payment affects every choice you make when you buy a home. Although you should look at ads, familiarize yourself with neighborhoods, learn about prices, and read as much as you can - when you get ready to take action - the first thing you should do is figure out how much money you have available for the purchase.
Thank you for visiting today. If this is your first visit, take your time and look around. I have plenty of information and resources available to you. If you are a return visitor, thank you. I would love to hear from you and tell you how I can serve all your real estate needs.
I got lucky, being referred to Caren by the realtor.com system as I searched for distressed properties. She helped me organize my search. She responded quickly to my requests to show a home and displayed great patience during my time consuming process of inspecting each home; even pointing out potential issues I hadn't noticed. She provided referrals to insurance and financing professionals. I'm happy with the house I bought and its price. I plan to use Caren to sell or rent the house and to help me find the next one. I found her honest, straightforward and a pleasure to work with.Rick W.
I researched many realtors and once I read about and then spoke with Caren, I instantly realized how professional and knowledgeable she was...definitely a cut above other realtors! I inquired Caren's help to sell my home and not only did she go above and beyond helping me get my house ready and presentable to sell (I live out of state so there were many things needing done, including meeting with carpenters to yard workers, and in some cases doing some of the work herself, at no charge)! She topped it off by following through with her promise and selling the home in 6 weeks!!! I have done business with many realtors all throughout my life and throughout this great country. I could tell she genuinely cares, puts her clients first and is by far the best in this region, if not the country! Bottom line is she is real and has a big heart when it comes to her clients! Thanks again Caren, you alone made my transition stress free and showed genuine care! The next house I buy I know who I'm coming to....Caren Mulay! Hope all is well Sincerely, Eric RothEric Roth
My husband and I found Caren to be honest, efficient and straightforward, rare qualities in the real estate world.Linda W.