6 Misconceptions That People Spread About a Glendale Down Payment

6 Misconceptions That People Spread About a Glendale Down Payment

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Down PaymentWhen thinking about buying a Glendale house many people worry about the down payment.  A down payment can be hard to get. Depending on the amount being borrowed, the amount needed for the down payment can vary greatly.  Starting to save as soon as possible will help with this process, but there are many rumors about down payments that just are not true.

How Much to Put Down

Most people think that they have to put twenty percent down on a Glendale house.  While this has been true in the past, many lenders and loans do not require this anymore.  There are options for those that cannot get the full amount for a large down payment.

In fact, there are some loans need as little as three or four percent down.  There are even loans that need nothing down, like the Veterans Affairs loan. Even buyers who do not qualify for these programs can avoid a large down payment and pay private mortgage insurance.  

Paying PMI

Private mortgage insurance does allow people to get a loan without a large down payment.  Private mortgage insurance does not always have to be paid over the life of the loan. An FHA loan, however, will require a buyer to pay PMI until the loan is completely paid off.

With a conventional loan, PMI only needs to be paid until the principal balance on the loan is seventy-eight percent or less than the original purchase price.  After this point, it is no longer required and the monthly payments can be stopped.

Cash Doesn’t Always Win

Competing against cash offers is scary.  The rumor around the Glendale real estate market is cash offers always win over a buyer that is going to a lender.  This is true in situations where the seller wants to close as quickly as possible. However, if they are willing to wait out the loan approval process they are better suited to go with a Glendale buyer that is not making a cash offer.

Cash offers are typically lower.  To win out against cash offers it is best to put the highest offer down immediately.  Do not try to negotiate price.

Getting Assistance

There are programs available to assist Glendale home buyers with their down payment.  That being said, these programs are not always easy to find or apply for. Many of them will have income guidelines that a Glendale home buyer must meet or they will be denied.  While it can be a frustrating process it is worth a shot if it is the only option.

Putting More Than Twenty Percent Down

A Glendale home buyer that has more than twenty percent saved for a down payment is sitting in a good position.  While some may say there is no point in putting more down than needed, this isn’t true. The more money that is put down the lower the mortgage will be.  This can help to lower monthly payments and even secure a lower interest rate.

For a lower interest rate, a borrower must put at least five percent extra down.  At twenty-five percent, the interest rate will decrease and again at thirty-five percent.  This drop in interest can help a borrower save more money over the life of the loan.

Verifying the Down Payment

A down payment cannot come from a loan.  If anyone is providing money for a down payment it needs to be a legitimate gift.  Any money that has been gifted to a borrower will need to be verified to prove that it is a gift.  A written letter will need to be provided to state that the gifter does not plan on getting the money back at any time.

To save for a down payment a potential Glendale homeowner will need to be vigilant.  While there are misconceptions on how much money a Glendale buyer needs, there should be some money held back for a down payment.  A Glendale buyer does have options if they play it smart.

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