All About Greenville SC Real Estate

Aside from good credit, a down payment is one of the top factors when applying for a mortgage. Without a down payment, you're likely to find that many lenders refuse to even speak with you, and others will be willing to give you the loan, but with much higher fees and interest rates.

What is a down payment?

A down payment is the money that you put down on a home when you buy it. This is separate from your mortgage and is cash that you come up with yourself. Most people save money over a period of months or years for a down payment, though some have taken out personal loans to get the money.

How much do you need?

The typical down payment is 20%. On a home that costs $100,000, this would be $20,000. Depending on the lender, you may be able to get a loan with a smaller down payment, but that creates its own set of problems.

The higher your down payment, the less money you have to borrow, which also means less money that you have to pay back. While 20% may be standard, if you can go higher, you'll be doing yourself a huge favor.

What happens if you don't have 20% for a down payment?

You may not have 20% because you couldn't manage to save that much, or perhaps the home you've found is more expensive than you'd anticipated. Either way, a smaller down payment is not necessarily a total deal-breaker.

It does, however, mean that your mortgage deal may not be as good as you'd hoped for. You may get higher interest rates. You may also be subject to private mortgage insurance (insurance that protects the lender in case you stop paying the mortgage - this means you're paying for something that is essentially of no use to you personally), and other things.

How do I come up with the down payment?

There are many ways you can save money for a down payment. You could set aside a certain amount per month for a year or two. You could save any lump sum payments you get, such as tax refunds or inheritances. It can also help you if you check the average prices for homes that you might like in your area, even if you're not ready to buy. It will give you a better idea of how much money you'll need to save.

By having a hefty down payment, you accomplish several things. You show sellers and lenders that you're serious about buying a home. You decrease the risk lenders take on you, which makes them more willing to loan you money and give you a lower interest rate. You save yourself money in the long term by not having to borrow as much. It's well worth it to take your time and save as much as you can toward the down payment when you're ready to buy a home.