What is my down payment? Should I put more or less down?

Various types of loan programs exist that offerA formal bid from the home buyer to the home seller to purchase a home…. various combinations of down paymentA portion of the price of a home, usually between 3-20%, not borrowed and paid up-front in cash. Some loans are offered with zero down-payment…., interestThe cost you pay to borrow money. It is the payment you make to a lender for the money it has loaned to you. Interest is usually expressed as a percentage of the amount borrowed…. rate, mortgageA loan using your home as collateral. In some states, the term mortgage is also used to describe the document you sign (to grant the lender a lien on your home). It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price… insurance, and payoff schedules.

Some loan types require a minimum of 3% down payment (FHA Loans) or 5% on conventional loans. Veterans can buy with no money down (VA Loan). Putting down as little as possible allows you to take full advantage of the borrowing leverage and tax benefits of homeownership. Some mortgage interest and property taxes are deductible from state and federal income taxes.

Buyers using a small down payment can leave a reserve for making improvements. It might be more prudent to make a larger down payment and thereby cut the amount of debtMoney owed from one person or institution to another person or institution…. financed. The term of the loan has a tremendous impact upon the amount of principalThe amount of money borrowed or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid…. paid down on the loan each month. The difference in equityThe value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity…. pay down between a 15 year fixed loan and a 30 year fixed loan is astonishing.

When a buyer puts 20% or more as a down payment on their desired home, the Lender can waive the mortgage insurance requirement. Mortgage insurance is required on all other loans, except veterans guaranteed loans. That means a full years premium for the insurance is collected “up front’ at the closingThe process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See… of escrowAn item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon…, plus you will be paying it monthly as part of your principal-interest-taxes-insurance.

Talk to your lenderThe lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing…. about various loan scenarios and make sure you understand the near-term and long-term implications of each approach.