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What is a Down Payment on a Home Loan?

down payment

When it comes to financing a home or a build, there are several factors involved in the type of loan you apply for. The interest rate is a key factor, but the more important one is the down payment.

A down payment on a home is the money you give to the lender, initially. Typically, this is a piece of the overall cost of whatever is being borrowed. Whatever amount is left over after the down payment is paid, is paid off over time in the form of a mortgage.

Generally, a down payment is a percentage of the total cost being borrowed. It’s important to note that any down payment under 20% normally requires mortgage insurance, (to make sure you repay your loan.) However, if you put down more than 20%, you don’t need insurance. For this very reason (amongst other things) the Conventional Loan is among the most popular.

The type of loan you qualify for will influence the percentage (if any) you provide as a down payment. For example, FHA loans typically have a low down payment, as they’re intended for lower-income borrowers. Jumbo loans – borrowing more than $424,100 – have higher down payment. Loans provided by the United States Department of Agriculture have no down payment.


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Down payments vary based on the type of loan and the conditions of the lenders. Normally, the more money you borrow, the higher the down payment. The reasoning is that down payments usually move directly with the level of risk. The rate in which these two variables increases and decrease is also related to the interest. Lower down payments often come with higher interest. Inversely, higher down payments may have lower interest. However, as we stated, this all depends on your situation and lender.

Here at Assurance Financial, we’re the home loan experts. It’s the only thing we do, and it’s what we do best.

When it comes to the nuances and intricacies of conditions, terms, agreements – let us worry about that. Contact one of our experts today and let us find the perfect loan and down payment for your dream home!

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