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Mortgage Down Payment

When qualifying for a mortgage, one of the things that will be required for you to do is to make a down payment.  Many people have questions about the mortgage down payment, why one is required, and how large it will have to be in order to get the loan to close.  Let's go over some of the biggest reasons why a mortgage down payment is required in order to close a loan. 

First of all, a mortgage down payment usually only applies to mortgages that are obtained to purchase a house.  When getting mortgage refinancing, a mortgage down payment is usually not needed.  The only reason a down payment would be needed on a mortgage refinance is if the house is worth less than the refinance amount needed.  Bringing in a down payment would be the only way to even out the difference at the closing table.  Down payments are required on just about any loan program as the only 100% program that does not require a down payment is that of a VA loan.  To get a VA loan, you must be a veteran and be able to prove your VA status.  For everyone else, a down payment is just a way of life when it comes to getting a home loan. 

So why is a down payment needed?  The biggest reason why a down payment is needed is to be able to meet the guidelines that investors put forth for the lenders in order to close a loan.  By putting forth a down payment, it shows many investors that you are able to save money, and are thus going to be more able to make your mortgage payment over the long term of the loan.  Another huge reason for the reason for a down payment is that of mortgage insurance requirements.  Most insurance refuses to cover 100% of the loan that a lender gives out. To make up the difference, the lender will have a down payment made so that the lender is only loaning 80-90% of what the property is worth in order to give them a little bit of a cushion against market values and inflation.  

If you are looking for a bad credit mortgage, you can expect your down payment to be quite larger than normal. It is always a good idea to do some shopping around to determine what the down payment amounts are on the type of mortgage you are looking at obtaining. By doing this, you can adequately plan and start saving up for the required down payment for your mortgage.  

  

 

  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure

 

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