Buying
Guide
How
Much House?
Qualifying
How Much Can I Afford?
Sources For Down Payment
How to Reduce Down Payment
One Caution
Figuring Housing Budget
Two Lender Formulas
More Mortgage Help
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Mortgage
Insurance Can Reduce Down Payment
If you need a conventional loan, there is a way to put down only
5 or 10 percent. Through the lender, you will be required to buy
private mortgage insurance (PMI). This insurance provides protection
for the lender in case of default, and allows the lender to approve
a larger mortgage amount. In
a common approach, you'd pay an initial amount at closing (often
one percent of the mortgage if your down payment is 5 percent,
1/2 of 1 percent if you put down 10 percent). Then, included in
your monthly payments for your mortgage, you would pay an additional
one-twelfth of 1/4 percent of the mortgage balance. This payment
will usually continue until dropped at the discretion of the lender,
unless a stop point is specifically written into the deed of trust,
such as accumulating a 20% equity. Ask your lender for specific
figures for any loan program you are considering, as the amount
of mortgage insurance varies by the type of loan.
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