Down Payments

The down payment that a person puts down on a mortgage ensures that the lender is taking less risk and also commits the buyer to paying the full amount of the mortgage. The higher the down payment, the easier it will be to lower your monthly payment and to qualify for a higher loan amount.

Alternative Sources of Funding

Many people do not have the cash on hand to make a huge down payment, however, there are other sources of funding that the person can use. Savings accounts, as well as friends and families are excellent ways to get the money that you need in order to make a bigger down payment. In addition, there are some cities who are looking to expand their communities and may offer money to the person for the down payment. Some people may receive $5,000 to $10,000 without having to repay this amount.

Loan to Value Ratio

The down payment is referred to as a percentage of the sales price and is often referred to by lenders as loan to value ratio or LTV.

Other Down Payment Options

Many banks will offer no down payment options, however, these are usually given to those first time home buyers that have the means to pay the mortgage, just not enough funds to come up with a down payment. In these cases, the lender is at a greater risk with the mortgage, so the buyer can expect to pay a higher interest rate.

Buyers should also consider a lease to buy option in which no down payment is required. You will continue to pay a monthly amount of rent that the seller will apply towards the total asking price of the home.

Sellers can also offer a carry back mortgage to buyers, which means that the buyers will be able to purchase properties that may have otherwise been out of their price range.

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