San Diego Mortgage Down Payment Facts
A down payment significantly influences the price of the home you can afford. A San Diego mortgage down payment is the amount of money the home buyer initially pays for their new home. Most lenders require a 20% down payment (i.e. 20% of the total purchase price of the home). If you cannot afford to pay 20% of your home's purchase price up-front, there are other options to consider.
Negotiate
Depending on the lender you choose, you may be able to negotiate a lower San Diego mortgage down payment percentage. The less money you put down up-front, however, the more your mortgage will cost over the life of the loan. This is because you must pay interest on the money that you couldn't afford to initially place as a San Diego mortgage down payment.
Private Mortgage Insurance
If you cannot afford a 20% down payment, you may still qualify for a San Diego mortgage if you purchase Private Mortgage Insurance (PMI). Like an apartment's security deposit, PMI protects the lender if the borrower cannot make his or her monthly mortgage payments. Purchasing PMI allows borrowers to put as little as 3% down on their home; however, PMI comes at a cost. Private Mortgage Insurance makes monthly mortgage payments larger; it generally costs about.5% of the loan (e.g. for a $200,000 mortgage, PMI will cost about $100 per month).
Some lenders ask borrowers to pay a year's worth of Private Mortgage Insurance at the time of closing (in this case, an extra $1,200). If you make all of your PMI payments on time, you may cancel Private Mortgage Insurance once you've reached between 20-23% equity in your home.
80/10/10 Loan
If you would like to avoid PMI payments, but still cannot afford a 20% down payment on your mortgage, speak with your San Diego financial advisor about an 80/10/10 loan. With an 80/10/10 loan (a.k.a. piggyback loan), borrowers pay 10% down and then take out two loans: one for 80% and the other for 10%. The 10% loan has a higher interest rate, so you should plan to pay off this smaller loan first. Taking out two loans allows you a way around purchasing Private Mortgage Insurance.
401(k) & IRA Options
A San Diego mortgage [http://www.sandiegohomemortgagerates.com] down payment is often a large sum of money; therefore, some borrowers have trouble quickly accumulating so much cash. If you have exhausted all financial options for your San Diego mortgage down payment, you may want to consider dipping into your retirement account or long-term savings account.
Borrowers can generally take out a loan that is up to 50% of the total value of their 401(k), up to $50,000. Borrowers may also withdraw up to $10,000 from a traditional IRA or Roth IRA. Be aware, however, that you may incur a penalty if you withdraw funds early from an IRA. Speak with your San Diego financial advisor to determine which avenue is right for you.
Negotiate
Depending on the lender you choose, you may be able to negotiate a lower San Diego mortgage down payment percentage. The less money you put down up-front, however, the more your mortgage will cost over the life of the loan. This is because you must pay interest on the money that you couldn't afford to initially place as a San Diego mortgage down payment.
Private Mortgage Insurance
If you cannot afford a 20% down payment, you may still qualify for a San Diego mortgage if you purchase Private Mortgage Insurance (PMI). Like an apartment's security deposit, PMI protects the lender if the borrower cannot make his or her monthly mortgage payments. Purchasing PMI allows borrowers to put as little as 3% down on their home; however, PMI comes at a cost. Private Mortgage Insurance makes monthly mortgage payments larger; it generally costs about.5% of the loan (e.g. for a $200,000 mortgage, PMI will cost about $100 per month).
Some lenders ask borrowers to pay a year's worth of Private Mortgage Insurance at the time of closing (in this case, an extra $1,200). If you make all of your PMI payments on time, you may cancel Private Mortgage Insurance once you've reached between 20-23% equity in your home.
80/10/10 Loan
If you would like to avoid PMI payments, but still cannot afford a 20% down payment on your mortgage, speak with your San Diego financial advisor about an 80/10/10 loan. With an 80/10/10 loan (a.k.a. piggyback loan), borrowers pay 10% down and then take out two loans: one for 80% and the other for 10%. The 10% loan has a higher interest rate, so you should plan to pay off this smaller loan first. Taking out two loans allows you a way around purchasing Private Mortgage Insurance.
401(k) & IRA Options
A San Diego mortgage [http://www.sandiegohomemortgagerates.com] down payment is often a large sum of money; therefore, some borrowers have trouble quickly accumulating so much cash. If you have exhausted all financial options for your San Diego mortgage down payment, you may want to consider dipping into your retirement account or long-term savings account.
Borrowers can generally take out a loan that is up to 50% of the total value of their 401(k), up to $50,000. Borrowers may also withdraw up to $10,000 from a traditional IRA or Roth IRA. Be aware, however, that you may incur a penalty if you withdraw funds early from an IRA. Speak with your San Diego financial advisor to determine which avenue is right for you.
