Down payments

When you buy a house, you will probably be required to make a down payment. This payment, depending on your available savings and the policy of your lender, might be anywhere from five to twenty percent of the price of the house. In certain cases—for instance, if you have bad credit—you may be required to make an even larger down payment.

In any case, it is always advisable to make as large a down payment as you can afford. Larger down payments usually translate to more favorable home mortgage terms. Usually, you can get a lower interest rate. Sometimes the term of the loan will be shortened. In any case, it translates to bigger savings for you down the road.

That said, there are plenty of potential home mortgage borrowers who do not have the kind of cash that a down payment requires. Down payments are expensive, and not everyone has the money to pay for them.

Happily, there are options available if you can’t afford to pay for a standard down payment on. First of all, you might be able to make a reduced down payment if you are willing to pay for private mortgage insurance (PMI). PMI helps to make sure that your lender will get paid even if you aren’t able to uphold your end of the deal.

There are other possibilities. For instance, you can often get a reduction if you are willing to pay higher interest rates on your home mortgage. Finally, federal assistance is available to some people, like those with low incomes or first-time homebuyers.