Down Payments
Beaufort and Morehead City, North Carolina
One benefit of the many different mortgage programs is the ability for lenders to accommodate almost every buyers needs when it comes to a down payment amount. Most lenders have options for programs requiring down payments of 3%, 5%, 10% or more. Depending on your resources and future plans, it might make more sense to put down as much or as little as possible. There are also ZERO down loan options that will allow the buyer to finance the entire purchase price of the home.
The benefit of many of these programs is that they are often structured in such a way to avoid PMI or mortgage insurance that is an additional cost lenders charge on loans with less than 20% down. PMI is avoided by taking out a first loan for 80% of the value of the home, and a second loan for the amount remaining minus the down payment. For example, someone wanting to put down 5% would take out a first loan for 80% of the purchase price and a second loan for 15% of the purchase price. While the Buyer will usually pay a slightly higher interest rate on the second loan, interest is tax deductible while PMI (mortgage insurance) is not.
Often times, a loan program will also let you finance your closing costs as part of the loan, allowing you to keep as much money in your pocket as possible. Of course this opportunity varies from program to program, but is worth asking about.
You should also be able to find loan programs that allow gifts and loans from other sources to help with your down payment. A final idea to help with your down payment is the opportunity to withdraw from the 401K program through your employer. However, there can be penalties for doing so, and you should always check with a qualified tax specialist to learn about how you can best utilize this option.
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