For many Americans “coming up” with a down payment for their first home purchase can be a major roadblock – and quite often the reason for renting, rather than owning. A down-payment is the difference between the home’s purchase price and its mortgage amount. This percentage of the sale price must be paid up-front and can vary by lender, location, and loan program. A higher down-payment generally translates into lower loan interest rate requirements.

 

Typically, a down-payment comes from personal cash savings, but it can also be a gift that is not to be repaid or a borrowed amount secured by assets.

 

While conventional loan down-payments may be close to 20% of the sale price, government loans typically have lower down-payments requirements. This allows potential homebuyers who normally cannot meet down-payment requirements an opportunity to qualify for a mortgage. Keep in mind that down-payments that are less than 20% of the sale price typically require mortgage insurance payments.

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