Wednesday, March 3, 2010

Your Savings Determines Your Down Payment

You have gone through all the ads on homes for sale and visited few homes in person. Finally you have liked a home and are now willing to buy it. But before you call your realtor and ask him to finalize the deal, take a moment and look at your savings. You may ask why this is important when you will be availing a home loan. Let me tell you, your loan will take a while to be lent and in the meanwhile you will need ready cash to pay for down payments and closing costs. Your savings will also determine loan program you are eligible for.

If your savings is minimal, only to make an initial down payment, then you are open to limited choices of loans. But on the other hand, if your savings show an amount capable of making a large down payment then you are open to a wide spectrum of loan programs including the VA, FHA, fixed and adjustable interest loans, graduated payment mortgage, etc.

Having an idea of the down payment you can make will also help you determine the shopping interest rates. There are loan programs that charge more interest than what is regular if you are making a minimal down payment. Fixed interest rate loans like VA, FHA, etc also vary their rates depending on your savings. You can find out the rates of each loan depending on your savings by contacting the loan officers even on the phone. But if you prefer shopping for your loan in the internet, you may not be able to deduce the actual rate.

Before you purchase the home, you will have to submit an offer in writing to the seller. This offer will have to include the down payment you will be making and the loan program with all its rules. The effect of your savings and down payment are especially important with the VA and FHA loans. If you want to ask the seller to pay for the closing costs, then you must be certain that your loan program allows it.

Most importantly, when you make a small down payment, your lender will ne even strict about what you write in your purchase offer. It is now clear that the down payment you make during home purchase affects every loan choice you make to finance your purchase. So before, writing a purchase offer, make sure you have enough savings to make a good down payment!

For additional resources and information please visit the following sites.

Resource Links:

Bill Fields All Star Coaching Program:
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T. Sami Siddiqui (Broker/ Owner) Buzz About Sacramento Blog:
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