Home ownership

Home Ownership comes with Benefits

Mortgage Down Payment

The down payment presents the biggest obstacle to home ownership for most buyers, especially first-time buyers.

Mortgage down payment can be as little as zero to over 20 percent. There are benefits and liabilities for each down payment strategy.

VA loan requires no down payment and has no monthly mortgage insurance. Veterans using the VA Home Loan Guarantee benefit must pay a funding fee.

FHA loans require just 3.5 percent in cash for a down payment. Loans insured by the Federal Housing Administration (FHA) offer first-time home buyers the advantage of a down payment as low as 3.5 percent. But rising premiums for the required mortgage insurance (MIP) have made these loans very expensive.

The California Homebuyer’s down payment Assistance Program (CHDAP) can help with the down payment. It is complicated. It takes time. And any real estate offer with a CHDAP down payment is at a disadvantage to other offers. But with the right real estate agent, they can build the case for the offer and get it accepted by the seller.

Many conventional mortgages require a down payment of at least 5 percent of the purchase price. However, putting less than 20 percent down can have significant financial consequences. PMI (private mortgage insurance) is what you pay to a lender to avoid loan failure on a conventional loan. If you put down less than 20% on your home, you will pay PMI until you meet 20% of your conventional loan. If you put down less than 20% on an FHA loan, you will pay MIP for the lifetime of the loan.

Another benefit of a 20% down payment is that it saves you hundreds of dollars on your monthly payment, and will build equity in the house more quickly. This will save a considerable amount of money on interest.

Time is a friend when starting early to save for a down payment. Overcoming the down payment issue is one of the major steps a first time home owner must surmount. Qualifying for a mortgage and the down payment are the two biggest obstacles to achieving the dream of home ownership.

Focus on them to reach the goal—Home Ownership.


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