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Down Payments
Conventional Loans |
Down payments are back
If you're buying a home, you'll need a down payment of anywhere from
10% to 25% of the purchase price, depending loan type, your credit
score, and qualifications.
Just a couple of years ago, almost anyone could get 100% financing.
Down payments were a relic of the '80s and '90s. But such
irresponsible lending is why foreclosures are at a record high, the
banking industry is collapsing and the economy is facing uncertain
times.
So the down payment is back.
"100% (financing) is gone," says Jim Pair, president-elect of the
National Association of Mortgage Brokers. "What we're doing now is
what we did 10, 15, 20 years ago as far as lending is concerned."
That's a good thing -- even if you're a first-time buyer.
Buyers who save for a down payment are likely to be successful
homeowners. It forces them to manage their money.
Having equity in your home -- that's the difference between what
your home is worth and how much you owe on the mortgage is critical
for your financial well-being.
Millions of families who borrowed every cent they needed to buy a
home are now upside-down on their loans. Home values have declined,
and they owe more than the property is currently worth.
It's virtually impossible for them to sell or refinance unless they
have tens of thousands of dollars in cash to make up the difference.
And most don't.
That's why so many buyers who used 100% financing can't escape the
rapidly rising payments on their adjustable-rate mortgages and are
losing their homes to foreclosure.
That doesn't mean we've turned back the clock 20 or 30 years to when
lenders demanded 20% to 30% down payments from everyone. But you
will need:
A 5%-to-10% down payment if you:
Have a credit score of 720 or higher. Some lenders will consider
borrowers with credit scores as low as 620, but to qualify, you may
need additional assets, such as a retirement fund or hefty savings
account.
A 10%-to-20% down payment if you:
Are applying for more than $417,000, which requires what lenders
call a jumbo loan.
At Mortgage Market of Florida we offer up to 90%
financing for the purchase or refinance of a primary residence under
a conventional loan.
This means you will need at least 10% down or
equity of the purchase price or appraised value.
Your down payment funds must be on deposit and
verifiable for the last 60 days.
If you have your down payment in a checking or
savings account and it has been on deposit for the last 60 days,
you'll have no problem documenting your down payment. Usually 2
months of your most recent bank statements will show your down
payment funds and satisfy this requirement.
If your down payment is from a sale of a car, for
example, simply provide the current blue book value and a copy of
the title along with a paper trail showing the sale of the car and
deposit of those proceeds into your account. In this case the 60 day
requirement in not required since you probably owned the car for at
least 60 days.
Tax refunds are easy. Just provide a copy of your
tax return showing your tax refund amount and a copy of the check or
automatic deposit into your account.
Sale of real estate. Simply provide your closing
settlement statement that shows the proceeds you received at
closing. Then simply provide a paper trail of those funds deposited
into your account. A counter deposit slip and settlement statement
usually satisfies this requirement.
If your down payment is from another source,
contact us and we can help you with your down payment paper trail.
We're here to help.
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