Qualifying for a low down payment
loan is much like applying for a regular loan. To be considered for a
low down payment loan, you generally need to have:
- sufficient income to support the monthly
mortgage payment
- enough cash to cover the down payment
- sufficient cash to cover normal closing costs
and related
- expenses (explained below)
- a good credit background that indicates your
payment history or "willingness to pay"
- sufficient appraisal value, which shows the
house is at least equal to the purchase price and, in some cases
- a cash reserve equivalent to two monthly
mortgage payments
Closing costs, or settlement costs, are paid
when the home buyer and the seller meet to exchange the necessary papers
for the house to be legally transferred. On the average, closing costs
run approximately 2% to 3% of the house price. This percentage may vary,
depending on where you live. Closing costs include the loan origination fee
(if not already paid), points, prepaid homeowner's insurance, appraisal
fee, lawyer's fee, recording fee, title search and insurance, tax
adjustments, agent commissions, mortgage insurance (if you are putting
less than 20% down) and other expenses. Your lender will give you a more
exact estimate of your closing costs.
Points are finance charges that are calculated by the lender at closing.
Each point equals 1% of the loan amount. For example, 2 points on a
$100,000 loan equals $2,000. Lenders may charge 1, 2 or 3 points in
up-front costs in addition to the down payment. The more points you pay,
the lower your interest rate will be. In some cases, you may be able to
finance the points. |
