There are several important steps in the home buying process. You’ll need to have good credit, enough monthly income and the often forgotten about down payment. Without a solid down payment you may not be able to buy your dream home.
There are two things that determine how much you will pay every month for the next 30 years. Those are: the interest rate and the amount you borrow. Your interest rate is determined by how much rates are at the moment and by your credit score. The amount you borrow is determined by the price of the home minus your down payment. Therefore, the amount of your down payment will affect your monthly payment for the next 30 years.
You will want to make sure you put down 20% of your home’s price. If the house you want to buy is $250,000 then that means you need $50,000 as a down payment. This is not a rule, but more of a recommendation. The reason is because if you put down less than that amount you will have to pay private mortgage insurance (PMI) every month. This is an additional monthly fee that does not benefit you at all.
The bank will accept your down payment in the form of a wire transfer. This means that you must have the money in your bank. But don’t think you can just deposit a large amount of money in there and the bank will accept it. They will want to see that the money has seasoned. In other words, they want to see that it has been there for a while. They also want to know how you got that money. The reason for that is that there are strict money laundering laws in place. It is suspicious if you have an account that usually rests at $2,000 suddenly surge to $50,000 overnight.
In order to save up enough money for a down payment you’ll need to be very disciplined. It can be difficult to have money left over every month and choose to put it in your savings account rather than spending it. That discipline is the exact same discipline you’ll need to make your mortgage payments every month. Even though it’s difficult and can take a while, the end result is worth it.
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