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Mortgage Down Payment  

When considering a new mortgage, whether for a home purchase or doing mortgage refinancing, there are many factors you will need to consider when determining how much you can borrow.  One of the biggest of these factors is the amount of money you will need for a down payment.  Let’s look at the down payment details.   

By asking for a down payment, the lender assumes less risk because if you put down money, it shows that you are at least somewhat capable of saving money if you were able to save enough for a down payment.  This historically has been shown to mean that you are more likely to make your monthly payments if you know how to save money.  To have less risk exposure, the lender also will likely want you to put at least 10 - 20% of the value of the home down so that if you were to default, there is equity in the home if he has to quickly sell it to recover his money.   

While a mortgage down payment is necessary when you are purchasing a house, there are different rules for a mortgage refinance.  When you are doing mortgage refinancing, you are borrowing against the equity in your house, so you may not need a down payment.  Instead, the lender looks at the equity you have in your home as the collateral to secure the loan, in a sense.   

Different loan programs require different amounts for a down payment.  A VA loan doesn't usually require a mortgage down payment, but you must be a veteran to qualify for this type of loan and also meet other requirements.  A conventional loan usually requires at least a 10% down payment, while an FHA loan usually only requires 3.5% down.  A bad credit mortgage will usually require more money down than if you have good credit and can qualify for a traditional mortgage.  A jumbo mortgage usually requires 30 to 35% down, since it is a greater risk to the lender.  You will need to consider this in your planning.   

The down payment can vary greatly from one lender to another, so it really pays to shop around for a loan that you qualify for that has the lowest down payment available.  Talk to several lenders and get their ideas for what may fit your individual needs and circumstances.  Even though it takes a lot of time, checking around to get the lowest interest rate and lowest closing costs can end up saving you thousands of dollars in the end.