Down Payment and Fees

For most people, buying a home is impossible without a mortgage.  A mortgage is type of loan used to finance the purchase of real estate.  Many people make a down payment and then repay a mortgage with monthly payments that also include interest.  A down payment can lower your monthly mortgage payments, as well as help you avoid private mortgage insurance, or PMI.

Aside from a down payment and monthly payments on a mortgage, you will also probably be expected to pay some fees when you close on the loan.  For that reason, it is a good idea to have between 3 and 5 percent of the loan amount to cover these costs.  Closing costs can include a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement.

Different lenders require different figures for down payments and fees, so it is important that you know what you have and what is expected of you.  There are no and low down payment options, but remember that the more you have for a down payment, the lower your monthly payment will be.  Also keep in mind that having 20 percent for a down payment can help you avoid PMI.  It can be helpful to negotiate closing costs with the seller of the home you are purchasing and your lender.  By being an informed consumer, you could end up having some fees waived by your lender or covered by the seller.  Read the fine print and know what costs are required so you can save money.