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Without having sound financial background, you can buy homes with many down payment options. Buying a home sometimes seems like a daunting prospect, especially when buyers are confronted with a down payment. In the past, home buyers had to use a traditional mortgage plan: one that demanded that buyers put down 20% of the purchase price of the home. Fortunately, there are a lot more options for new buyers.
Think about how much of a down payment you would have been required to save with a traditional loan. If you found a home you loved for $300,000, you would have been required to put down $60,000. That’s an enormous amount of money to save.
The traditional 80/20 loan wasn’t so unrealistic decades ago when home prices were so much lower. When a new home was priced at $50,000, saving $10,000 wasn’t quite such an insurmountable obstacle. But rising home prices have meant that mortgage companies and banks either have to come up with other options, or buyers would have to wait decades to purchase a home.
There are a number of lending programs that make buying a home much more affordable. Some of the lending programs require no down payment, while some programs only require a 5% down payment.
Although these mortgage programs make it more affordable for home buyers to get into a home, there are some factors to consider. When a buyer takes a loan out with less than 20% down payment, the lender will almost always require that the buyer pay a private mortgage insurance (PMI).
Private mortgage insurance protects the lender in the event that the buyer should default on the loan. PMI is usually assessed at 1% of the loan value. The PMI is added into your monthly payment, but it does not go towards the repayment of the loan or the interest. PMI is not tax deductible. When the loan amount drops below 80% of the appraisal price, the PMI is eliminated.
There are other options for purchasing a home. As an example, buyers can take out a piggy back loan. This is actually two loans; the first loan covers 80% of the home price, the other loan covers the remaining 20% of the price. If you take this type of loan, you avoid paying PMI on the loan.
Or how about asking the seller to help with what is called an 80/10/10 where the seller aloows you to borrow 10% from him/her - you put down 10% and traditional lenders finance the remaining 80%.
Buying a home is an important step in building a strong financial future. But it can be difficult to take the first step. That’s why it’s so important to talk with a mortgage consultant to discuss your loan payment options. You will find that there are a plenty of options available for you which allows you to get into your dream home. Call or email me for a list of the sellers who have already agreed to help with your down-payment, closing costs or financing. Robyn@RobynSeymour.com
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