Let Your Down Payment Work For You

By Debbie Wilson
Loan Page Columnist

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When buying a new home, too many people rush into home shopping phase and completely bypass one of the most important aspects, the down payment. Not only does the down payment affect the size of the home you'll buy, but it also determines how you write your purchase offer, what type of new home loan you qualify for, and the type of mortgage interest rate you obtain.

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Writing the Purchase Offer

One important reason to know how much money you have to put down on a new home is that it has a great effect on how you write your offer. When writing an offer, not only are you required to put your down payment information in the offer, but various mortgage programs also have different rules on how the offer can be written. This can become a vital step, especially when dealing with FHA and VA loans.

What Kind of Mortgage Can I Qualify For?

The amount of your down payment can actually affect your ability to qualify for a new home loan. If you are only able to put down a small amount, mortgage lenders tend to be quite strict when it comes to conforming to underwriting guidelines. However, if you have the ability to make a larger down payment, many lenders will tend to make allowances or exceptions to the rules.

Mortgage Interest Rate Options

When shopping for interest rates, the amount of your down payment can often dictate your new home loan interest rate. Many loan programs charge a higher interest rate for minimal down payments, while customers with larger down payments are allowed more flexibility in interest rates and actual mortgage program choices.

Your down payment affects many aspects of buying a new home. And while it seems that the more money you put down, the better the mortgage options you will be afforded, that is not always so. The most important thing is that you do your research. Familiarize yourself with your neighborhood, learn about what types of mortgage and down payment options you have, and then, when you are ready to purchase that new home, you'll be prepared to find the right loan for your budget and lifestyle.

About the Author
Debbie Wilson owns and operates a lakeside resort. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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