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Your Savings and Down Payment

Your First Step Toward Buying a Home

When preparing to buy a home, the first thing many homebuyers do is look at the real estate ads in newspapers, magazines and listings on the Internet. Some potential buyers read how-to articles like this one. The next thing you should do - before you call on an ad, before you talk to a REALTOR®, before you shop for interest rates - is look at your savings.

Why?

Because determining how much money you have available for down payment and closing costs affects almost every aspect of buying a home - including how you write your purchase offer, the loan programs you qualify for, and shopping for interest rates.

Mortgage Programs

If you only have enough available for a minimum down payment, your choices of loan program will be limited to only a few types of mortgages. If someone is giving you a gift for all or part of the down payment, your options are also limited. If you have enough for the down payment, but need the lender or seller to cover all or part of your closing costs, this further limits your options. If you borrow all or a portion of the down payment from your 401K or retirement plan, different loan programs have different rules on how you qualify.

Of course, if you have enough for a large down payment, then you have lots of choices.

Your loan choices include such varied programs as conventional fixed rate loans, adjustable rate mortgages, buydowns, VA, FHA, graduated payment mortgages and all the varieties of each.

Shopping for Rates

A very important reason you need to have at least some idea of your down payment is for shopping for interest rates. Some loan programs charge a slightly higher interest rate for minimal down payments. Plus, the interest rates for different loan programs are not the same. For example, conventional, VA, and FHA all offer fixed rate loans. However, the rates vary from one program to another.

If you shop lenders by phone, the loan officer will be able to tell you which programs fit and quote your rates accordingly. However, if you are shopping on the Internet, you have to develop some idea of your loan program on your own.

Writing Your Offer

Another reason you need to have a clue about your down payment is because it affects how you write your offer to purchase a home. Not only are you required to put your down payment information in the offer, but also different loan programs have different rules that also affect how you write your offer. This is especially important when dealing with FHA and VA loans.

If you are asking the seller to pay all or part of your closing costs, you have to be certain your loan program allows what you are asking. For smaller down payments, lenders allow the seller to pay less closing costs than for larger down payments. Some loan programs will allow a seller to pay certain types of costs, but not others.

Finally, your down payment also affects your ability to qualify for a loan. When you make a small down payment, lenders are fairly strict about having you conform to their underwriting guidelines. For larger down payments, they will tend to make allowances or exceptions to the rules.

Conclusion

As you can see, the down payment affects every choice you make when you buy a home. Although you should look at ads, familiarize yourself with neighborhoods, learn about prices, and read as much as you can - when you get ready to take action - the first thing you should do is figure out how much money you have available for the purchase.

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Assist-2-Sell, Your Choice Realty
1355 Airbase Rd.
Mountain Home, ID 83647
Phone: 208-587-9111
(Connect to an agent 24/7)
Fax: (208) 587-8111
Email: Floyd@assist2sell.com
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"Highly recommend Melissa as a seller's agent! As long distance home owners with renters living in the house, we certainly didn't have the ideal situation for selling a home. She handled EVERYTHING to make the process as seamless as possible. We had great communication and she was willing to do whatever it took to get our home sold-- working with the renters, arranging repairs, etc. Melissa quickly sold a home we hadn't laid eyes on in 7 years. We couldn't be more pleased with our choice to hire Melissa as our agent." eschore5
Our family was growing but unfortunately our home wasn't. When my wife and I finally made the decision to sell and build a new home there were all lot of choices for our real estate needs. Some brokers wanted 5% and others 6% to sell our home. That to us seemed unreasonable. We worked hard to build up equity over time and didn't want to give nearly a third of it to a Realtor. I then got in contact with Susan Richelieu at Assist 2 Sell. Susan told us that she could sell our home at a significantly lesser rate and offer the same full service assistance as all other realtors in town. Hard to believe, right? To be completely honest, she was wrong, because she wasn't just as good as other realtors in town...SHE WAS BETTER!! Susan did an amazing job marketing our home and she even found the buyer. She did everything and stayed in constant communication with us so that we were never left in the dark. We had an accepted offer within 2 months! The best part is she saved us over $5000 in real estate fees. All of that money went back in our pocket and into our new home. Thank you Susan for representing my family. You truly are the best in the business. Matt and Michelle Chandler
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