Helpful Mortgage And Real Estate Advice

How Large A Down Payment Do I Need?

By on November 11, 2013 in Home Buying Advice, Mortgage Videos

Hidden Costs To Consider

Homeownership is the American dream, the cost up-front such as a down payment can put your dreams on hold. The average down payment for a home today is typically around 5-20% percent of the total cost of the loan. There are a few programs out there that require five percent or less as a down payment, but hidden fees may still be an issue for many borrowers.

Private Mortgage Insurance (PMI) is a fee you may be very surprised to find that you have to pay if your down payment isn’t at least 20% of the mortgage you need. While this fee is not legally mandated, practically every lender including private banks and federal mortgage programs may not approve your loan without it. PMI protects the lender if you happen to default on your loan. It’s calculated at between 0.3% and 1.15% of the value for the original loan and iscan be a part of your monthly mortgage payment. However, once you’ve paid down the principal on the loan to less than 80% of the original loan value, you may be able to drop you PMI in some cases.

Closing costs is another expense. Closing costs May include taxes and title fee over which you have no control, but you can control the points you pay. Points on the other hand are an up-front fee that can help lower the overall interest rate you’ll pay on the mortgage. When you pay more points up front, the cost of the loan and your monthly mortgage payment will be lower. You’ll need to balance the money you have available with the benefits of paying less over the life of the loan.

Making repairs to the property and renovating are some other expenses you might forget in the money you must have on hand to buy your home. Paint, wallpaper, draperies and supplies to handle repairs and landscaping, renovations can be quite costly, that is why there are Renovation Home Loans such as the FHA 203k with Energy Efficient Mortgage (EEM) Features, Fannie Mae HomeStyle, or Fannie Mae HomePath. To be better prepared and avoid surprising hidden fees, it is best to speak with a lender and ask plenty of questions surrounding the fees and costs of a mortgage.

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About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
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