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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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Thank you for visiting today. If this is your first visit, take your time and look around. We have plenty of information and resources available to you. If you are a return visitor, thank you. We would love to hear from you. We can serve all your real estate needs.

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Testimonials Page

Hello Janet, I just want to send a short note to thank you for your assistance in my purchasing the Lacey Street home. As you are aware, Gary and I had significant problems in finding a "qualified" real estate agent. When we found you, you made everything so easy..........you were very prepared.........you went way out of your way to assist us, even after the property was purchased. Things could not have gone smoother. Thank you for everything you have done. Mark Madding
Janet, My husband and I would like to extend our heart felt thanks to you for selling our home in Glen Lakes. We had previously listed the property without success. You provided us the necessary information to appropriately price our home and the home sold in a record 17-day period. We were thrilled with your results and would highly recommend your services to our friends. Thanks again so very much for your attention to detail and immediate success in selling our home. Kindest regards, Kevin and Natale Goff
Virginia, You went above & beyond to help make our dreams come true, making our first reality a paradise! to the first potential "yes" homes to home you were with us every step of the way. You truly do make miracles happen. Thank You for all of the prayers. Thank you from the bottom of our hearts. Brenda and Billy Lummus
Thank you for the efficient and speedy way you handled the sale of my house in Glen Lakes. Although I never met you, I feel as though I've made a new friend. I could tell in our phone conversations that you had my best interests at heart and worked quickly to find a buyer who was just right for my home. Your friendliness and the way you kept me informed about the way things were going impressed me. I really appreciate the promptness of the finalizing and your willingness to help make details clear to me. May God bless you with good health, success and prosperity in the future. It was a joy to work with you, my friend! Sincerely, Mona FayeLewis
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Thank you for visiting today. If this is your first visit, take your time and look around. We have plenty of information and resources available to you. If you are a return visitor, thank you. We would love to hear from you. We can serve all your real estate needs.