The Wonderful World of Down Payments & PMI
(Private Mortgage Insurance)
Making a down payment is one of the many factors that a lot of home seekers tend to overlook until the last minute. This is one of the first steps that you should take as a home buyer. You should research your down payment amount, save for it, and make sure you know what happens if you cannot make the minimum.
Don't Be Afraid to Take Your Time
Being able to make a down payment on a home is important. If you already have a budget in place then you know exactly how much you can put down. If you need to save a little more, there is nothing wrong with taking the necessary time to be able to make a down payment.
How Much You Should Expect to Save
The average amount of a down payment is considered to be 20%. There are many lenders who will require this and nothing else. You may find that there other lenders who will allow lower amounts than this. Many home loan programs will request down payments that are as low as 3.5%, but be careful because this usually means that the interest rates will be very high.
What's PMI?
You should know that, even though you may not pay the full 20% for a down payment, you can get stuck buying private mortgage insurance. This is what lenders will put in place so that they can protect themselves against buyers who may default in their mortgage payments. You just have to remember that if you plan on making less than the average down payment, be prepared to pay for private mortgage insurance. If you want to pay the 20%, be sure to save ahead of time.
Final Thoughts
Take your time to save up about 20% of the cost of your house for a down payment. When you can't pay the full amount, for any reason, you will likely need a PMI, so factor that into your budget. Good luck getting into your dream home!
From April article -
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