The Truth About Home Loan Down Payments

Your home loan down payment is required to have your loan processed. Most lenders would ask you to pay at least 20 percent based on the principal loan amount. So if the main balance is $70,000, then you would have to pay at least $14,000 as a down payment. The amount that you put down automatically gets applied to your total principal balance. This, in turn, will lessen your monthly payments for the rest of your home loan term. However, some lending companies would actually allow borrowers to put down as little as 3 percent if they're eligible to participate in certain loan programs.

Putting together such a huge amount of cash can be a challenge, especially for those who barely have enough to get by as it is. You may try to look for other sources of income to help you out with making your down payment. But doing so requires a whole lot of hard work and determination on your end.

Some lending companies often allow borrowers to put at least 3 percent as a down payment if they're eligible for it. These loans are often backed by the Federal Housing Administration and are available for borrowers who can't afford to put down a huge amount of money. However, doing so requires the borrower to have the private mrtgage insurance (PMI) to protect lenders from any potential loss due to home loan defaults.

Most real estate agents often tell their clients to come up with at least 20 percent down payment so that they wouldn't be mandated to have the PMI. Aside from that, the money that you put down would automatically get applied to your principal balance, which can make your monthly home loan payments much smaller than it would otherwise be.  Doing so can even help you save money in the long run. You can use the extra money to pay off your loan much earlier. Not only will you be able to shorten your home loan's term but you'd also be charged with less interest rates as well.

You should try to get in touch with a broker or a real estate agent to know more about your home loan down payment. There are also other fees that you need to consider when applying for a home loan. Just try to keep your finances in check before you apply for a home loan. Applying for a home loan can be both financially and emotionally draining so you have to be ready for anything that might happen. There's a possibility that your home loan application might take some time to be processed, or even worse get rejected. So just try to prepare your finances and all the necessary paperwork before applying for a home loan.