A Guide to Down Payments and How They Could Affect Your Coral Springs Home Loan
When starting the search for the perfect home, you want to learn all you can about the price range you can afford and what interest rates are available as well as where to get your . However, there aren’t a lot of resources that discuss the down payment. There are many misconceptions about the down payment and knowing some facts about it will help you prepare for the down payment requirement phase of purchasing your home.
What is a Down Payment?
A down payment is a good faith payment made by the borrower to the lender to show their commitment to the purchase of the home. The down payment is usually a percentage of the cost of the house a borrower is looking to buy.
Why is a Down Payment Required?
There are a couple of reasons that lenders have a borrower pay a down payment.
The process of saving the amount needed for the down payment shows a lender that the borrower can make the home loan payments. The more substantial the down payment, the more the lender assumes the borrower is financially capable.
If for any reason the borrower defaults on the mortgage, the down payment helps the lender by lowering the amount that they must recover by selling the house. The more significant the amount of the down payment, the less risk involved for the lender.
Can Monetary Gifts be Down Payments?
Gift money could be used as a down payment if the gift came from a relative or a partner that lives with the borrower. Lenders will want to make sure that the gift money is not a loan of any type. If it is a loan that could affect the borrower's ability to make their mortgage payments. If a borrower was to receive a cash gift from an undisclosed source, it could be included as part of the down payment as long as the money shows as theirs. To meet this requirement, the money would have to have been in the borrowers account for no less than 60 days.
Who Makes the Down Payment Requirements?
The down payment is required by the lender to help them in case of default by the borrower. Due to this, it only makes sense that most down payment regulations are put in place by the lenders and their private mortgage insurance companies. There are some exceptions such as and where government entities assume the responsibility for the loans. Those individual government programs then control the regulation of the down payments required for the home loan options that they provide.
What If I Can Not Afford a 20% Down Payment?
A 20% down payment does offer you as a borrower some comforts that a lower down payment wouldn’t provide, such as a lower interest rate and no private mortgage insurance built into your mortgage payment. However, you do not have to have 20% down to be able to buy a home. With good credit and the proper programs, you can get a down payment as low as 3% to 5%.
How Large Does a Down Payment Need to Be?
Now that you know that you do not have to pay twenty percent down payments, the next logical question is “How large does your payment need to be?”. You will want to go over your finances and see what you think is a realistic amount that you can save, and also what amount you will want to borrow. Remember that the larger the down payment, the better the interest rate and the lower the overall cost of your home will be.
Are Down Payments Tax Deductible?
There are many aspects of homeownership that are tax deductible. Unfortunately, the down payment is not one of the tax-deductible costs. However, not being able to deduct your down payment should not dissuade you from making it as large as possible. As previously stated, the more substantial amount that you can pay the less your home loan will cost you in the long run.
When Will I Need to Present My Down Payment?
You don’t have to have the entire down payment at the time of the offer; however, you may need some earnest money at that time. After this, you will need to provide the remainder of the down payment at the time you close on the home.
Down Payments in Coral Springs with Nationwide Home Loans
At , we offer complete mortgage services. Our company has many home loan options available. With our competent team and our years of experience, you will get the best interest rates and flexible down payment possibilities. We encourage you to communicate with us today so that we can discuss what you will need to help make your dream home a reality.