Down Payment & Closing Costs
When you are ready to begin looking at various houses to find your dream home, you need to prepare all of the necessary materials to present to the lender. Your lender will tell you exactly what you can afford so that you do not spend time looking at “too much” home. There are a couple key factors that you will need to consider when determining how much home you can afford.
Down Payment Requirements
Most loans today require down payment of between 3% and 5% depending on the type and terms of your loan. If you are able to come up with 20 ‑ 25% down payment you may be eligible to take advantage of special fast‑track programs and possibly eliminate mortgage insurance.
It is often thought that bigger is better when it comes to down payments. In many cases, this may be true. However, the arithmetic will differ from case to case. A bigger down payment means smaller monthly payments and lower interest expense for as long as you remain with a mortgage. This can be an important factor for most people. But if you can put your available funds to work for you so that they can earn more than the interest rate on your loan, you could be dollars ahead with a smaller down payment. Also a smaller down payment may allow you to keep your extra cash liquid and available for an emergency.
Don’t forget to think ahead carefully. In addition to the down payment on your dream home, you will be required to pay fees for loan processing and other closing costs. These fees must be paid in full in cash at the time of the final settlement, unless you are able to include these in your financing. Typically, total-closing costs will range between 2% ‑ 5% of your mortgage loan.
Prime Properties is a Sugar Land area residential and commercial real estate brokerage firm serving Fort Bend County and Southwest Houston. It is headed by Broker, Mike Harness and veteran Sugar Land area Realtors, Sherry Miles and Stephanie Nelson. For more information on Prime Properties, visit http://primepropertiestx.com/contact-prime-properties/ for contact form, phone and email information.