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Down Payment

A down payment is an amount paid at closing and "deposited" into the equity of the house. This not only can reduce your monthly payment, but can also qualify you for a lower APR. Through an FHA program, homebuyers can purchase a home with 3% down payment. 100% loans (0% down payment) are available, but usually you must pay a premium for these loans because they are viewed by the bank as being "more risky." If you make a down payment less than 20%, expect to pay mortgage insurance, which can add an additional 5-10% to your monthly payment.

Even though you do not have to make the down payment until the very end of the process, it is good to start thinking about and saving for both that and closing costs at the beginning. Both of these are integrally important in the home buying process and believe it or not, can be easily overlooked.

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