No More No Down Payment Home Loans!

Written By: Catherine J. Santo on April 9, 2010 No Comment

If you are looking at purchasing a home, the first thing you will hear is “how much are you putting down?” Why, and how much, do banks ask for a down payment?

If you are hoping to buy a home for the first time, or you are getting back into the mortgage market and realize that the market has changed a lot in recent years, you may want a little primer on what is going on with down payments.

You may have asked yourself, why does a bank require a down payment in the first place? Some may see this as a foolish question, but after the many disastrous subprime mortgages in recent years, where frequently no down payment was required, this question is coming up again.

The reasons a bank requires a deposit are usually two-fold. They would like to make sure you own a piece of the property and are putting some of your own money at risk. This makes you a more serious creditor. In addition, your deposit will reduce the balance due on the property, so they have a smaller risk on a larger equity in the property.

Most banks have learned from their sub prime loan problems, and there is probably no chance that you will obtain a low down payment loan, unless you are purchasing a home for the first time. Special programs exist where you may still be eligible. If you have to, how much can you put down as a deposit on a house ?

Most banks will require that you put down 20% of the purchase price of the home. Even though that is a big chunk of money, it actually saves you money since the higher the down payment, the lower the amount of points you will have to pay to get a par rate on your loan. Points are determined by a number of factors, which we discuss in another article. But, will you be able to afford a 20% deposit on your new house?

If you were contemplating the purchase of a home that cost $175,000, your typical 20% down payment would amount to $35,000. That is a pretty sizeable bank account, and most people have a difficult time accruing that kind of money along with paying all of their other expenses. Familieswho are selling an existing home can usually count on the increased value of their property to give them the down payment on a new home. But what if you don’t have a home to obtain this equity from? But for first time home owners, there are many programs that permit them to finance their homes with only 5% down payment. These programs are usually government guaranteed, so the lender is more willing to take such a risk. The down payment on our example home would only be $8,750, much more within the reach of the average first time buyer.

If you would like to learn about first time home buyer programs, or how you can use the equity in your home as a down payment, contact a professional mortgage consultant who can help you with these issues.

If you want to know more, visit: assurance hypothecaire you can also visit assurance vie