Posted On: April 27, 2020 by Prevail Bank in: Home Loans
What is a Down Payment?
Saving enough money for a down payment on a home can be challenging. This is one of the largest issues many homebuyers face when applying for a mortgage loan. A down payment on a home is simply a percentage of the total cost that a buyer has to pay up front.
How much is required as a Down Payment?
Minimum down payments are typically based on three sets of criteria; the type of mortgage, the lender, and your financial situation and history. Depending on the results of these criteria, your down payment amount will vary.
While you don’t necessarily need to put 20% down to purchase a home, you will need at least 20% down to avoid paying for Private Mortgage Insurance (PMI). PMI is an insurance that allows borrowers to purchase a home with less than 20% down payment. Private Mortgage Insurance is standard with the majority of Financial Institutions.
What are my options if I cannot pay 20% up front?
If you cannot afford to pay a 20% down payment on a house, you still have options, and the Prevail Bank lenders, like Ryan, are here to help.
Prevail Bank can also provide options for down payment assistant programs such as the Downpayment Plus Program. Qualified borrowers can apply for down payment funds to be matched, or provided for by a grant through the Federal Home Loan Bank of Chicago. For more information on the Downpayment Plus Program, and other options, reach out to our lenders.
Benefits of Paying 20% up front
When you pay a higher percentage on your down payment, you have more equity built up early on, meaning you’re that much closer to paying off your home. Paying more up front can also reduce your monthly payment, which means you can put those savings towards something fun! Lastly, you avoid add-ons such as Private Mortgage Insurance premiums and fees.
It’s important to do your research before applying for a loan; check rates, meet with lenders, save money!
Mortgage Pre-Approval Tip: We encourage younger homebuyers and first-time homebuyers, to begin saving for a down payment on a home right away. The sooner you start, the better! The real estate market is strong right now; education and a solid down payment can help young buyers become solid candidates to be approved for their first home loan purchase. Use the Prevail Bank website to your advantage. Get in touch with a lender you’re comfortable with and see what lending options are a good fit for you.
