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The Ins and Outs of a Down Payment

The Ins and Outs of a Down Payment

January 2nd, 2019 | VA Loans, FHA Loans, Preapproval, Purchasing a Home

Being able to purchase a home is often tied to how much of a down payment you have saved. If you have never bought a house before, you may not understand what a down payment is or why it is so important. Here’s the basics you need to know as you save up for your first home.

A down payment is a portion of the purchase price paid up front to your mortgage lender. It is very important to lenders because it shows them you are serious about the purchase and committed to paying off your loan. 

How Down Payments Affect Your Mortgage

The size of your down payment can affect your mortgage in several ways. For example, if you do not have a down payment equal to 20% of the purchase price, you will have to pay for private mortgage insurance (PMI), an insurance that protects your lender against you defaulting. It can be prepaid for the year or spread out in monthly payments tacked on to your mortgage bill. PMI costs between 0.5% and 1.0% of the home purchase price, so if you buy a home for $200,000 you could pay an extra $85 to $165 per month. 

The size of your down payment also affects how high your monthly payment will be in the first place. The more you put down, the less you will owe on the mortgage and the lower your payment will be. Your interest rate may be lower with a larger down payment as well as you will be less of a risk to the bank than someone who only puts down a small amount.

Loan Program Down Payment Requirements

A traditional long-term mortgage like a conventional 30-year fixed rate mortgage usually requires a 20% down payment. In some real estate markets that can seem like an impossibly high amount to save up. Fortunately, there are several programs that will allow borrowers to contribute less.

Government-sponsored entities Fannie Mae and Freddie Mac back many mortgage loans in order to promote home ownership. These government-guaranteed loans require down payments as little as 5%. For these so-called conforming loans, borrowers must meet certain credit standards and the purchase price of the home may not be above the conforming limit.

There are also loans from the Federal Housing Administration (FHA) that accept down payments as low as 3.5%. Again minimum credit score requirements must be met and mortgage insurance will be required.

If you are a veteran, you may be able to qualify for a VA loan with no down payment at all. While income or credit standards are not required, certain debt-to-income ratios must be met.

A down payment is an important part of any mortgage loan. While in general the bigger the better, there are loan programs to fit most needs.

Call Cornerstone Equity Group, Inc. today at 702-780-1500 to discuss what loan programs we offer and what down payment options you can qualify for. State Licenses: CA

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Cornerstone Mortgage

MAIN OFFICE:
5940 S. Rainbow Blvd., Suite 201
Las Vegas, NV 89118
(702) 840-1500
NMLS ID 340311
NV: DML License: 4814
CA: DOC License: 60DBO86761
CA: DRE License: 01848420

NEVADA:
5940 S. Rainbow Blvd., Suite 201
Las Vegas, NV 89118
(702) 840-1500
NMLS ID 340311
NV: DML License: 4814
CA: DOC License: 60DBO86761
CA: DRE License 01848420

CALIFORNIA:
1500 Standiford Ave., Suite A1
Modesto, CA 95350
(209) 578-9000
NMLS ID: 1741490
CalDRE License: 01848420

200 Tampa St.
Turlock, CA 95382
(209) 633-3222
NMLS ID: 1739798
CalDRE License: 01848420

HAWAII:
91-110 Hanua St., Suite 201
Kapolei, HI 96707
(808) 784-1239
NMLS ID: 1669660
HI: MLOC Liense HI-340311

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Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is an equal opportunity lender.

Nationwide Multistate Licensing System (NMLS) ID: 340311. Additional NMLS branch licenses: 1739798, 1741490, 1669660.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the Nevada Division of Mortgage Lending, license number 4814.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the California Department of Corporations under the Residential Mortgage Lending Act and Finance Lenders Law. CA Finance Lender #60DBO86761.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed by the California Department of Real Estate, License number 01848420.

Cornerstone Equity Group, Inc., dba Cornerstone Mortgage is licensed as a Mortgage Loan Originator Company by the Hawaii Department of Commerce and Consumer Affairs, license number HI-340311.

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