Home Mortgage Terms You Should Know: Down Payment
If you are looking for a home mortgage loan, you need to
be aware of some of the more important terms associated
with home loan financing. Through this article, you are
presented with an overview of the down payment.
What is the Down Payment?
Since most people don’t pay cash for a house, they
make a small down payment usually between three to 20 percent
and finance the remainder. The size of the down payment
you have to make depends on how good your credit is, and
on what kind of loan you get.
Three Main Types of Home Mortgage Loans
There are three main types of loans that you can acquire.
The first is a conventional loan. With a conventional loan,
the lender normally requires a ten to twenty percent down
payment. In some cases of exceptional credit they may allow
a five percent down payment but that is not the norm.
The FHA Home Loan Option
If you are a first time homebuyer, you might qualify for
an FHA loan. FHA loans only require a three to five percent
down. A bank makes the FHA loan but the FHA guarantees the
bank part of the loan in the case of you defaulting. FHA
loans are easier to get because the bank doesn’t take
on as much risk by loaning you the money as they would with
a conventional loan. These loans are easier to get if you
have credit problems. This is a real plus although there
is a little bit more red tape involved for a seller of a
property who sells to someone who is purchasing the property
with an FHA loan. A home must not be a fixer upper but rather
must be in excellent shape and pass an FHA inspection to
qualify for the loan. So the bottom line is that not all
homes may qualify for an FHA loan and not all sellers will
be willing to sell to you.
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