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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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Dawn Coulter
CRS, e-PRO, AHWD
Always: 570-204-7128
Office:  570-387-1600 x106
Email: dawn@dawncoulter.realtor
Licensed in PA:  RS298393

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By far, the best realtor that we have dealt with. Dawn is very down to earth, patient, and has a great personality! Dawn went above and beyond to help us find our first home. With the requirements we had, we knew it would not be easy, but we ended up finding our first home within a month! She made our experience a breeze! As new homeowners, we were unsure of how the process worked. Dawn made it very simple and was always right there to answer any and all questions we had. Our overall experience was great! Everything moved very quickly and smooth and we didn't have to worry about much at all. It is a great feeling to know we were in great hands! Brittany Creveling and Steve Powlus
Dawn is by far the BEST realtor a person could ask for! When we signed our contract, we worked with Dawn and Ron! What a great team! I know at times selling or buying a home can be frustrating, but Dawn knew just how to calm me down. Both are very professional and knowledgeable in their field! Thank you, thank you, thank you! This was the second house you sold for me; and, I would HIGHLY RECOMMEND them to any Buyer or Seller! J & L Lex, Bloomsburg, PA
Couldn't have found our dream home without Dawn! She was so amazing and such an incredibly hard worker! I would recommend her to anybody looking to buy a house!! Victoria Confer, Bloomsburg PA
Couldn’t be happier with the exemplary service provided by Dawn. If you want a professional, driven and thorough agent, she is the one for you!  Stephanie Crawford, Bloomsburg PA
Dawn made my family's home selling experience painless. As others have said she also went out of her way even after hours to answer questions and put out fires... We could not have done it with out her and I would highly recommend her to anyone looking to buy or sell in our area.. Christian Duffy, Millville PA
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WIRE FRAUD IS ON THE RISE. PROTECT YOUR FUNDS. Do not wire funds based on an email request, without verbal confirmation. Your lending institution will NEVER request that borrowers wire funds in connection with their transaction.  All lending institution and/or closing agencies recommend that borrowers bring certified checks to closing. 

Thank you for visiting! If you haven't been here before, please check out my 'About Me' tab. I look forward to hearing from you. If you have been here before, please visit more often.  I will be making changes and adding more information from time to time.

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