Down Payment For Your Home – The Free Mortgage Calculator

For a majority of homeowners, down payment for a home would mean at least 20 percent of the house’s purchase price as required by their mortgage.  However, with the recent changes in the housing market, lenders have modified the rules and have made it more enticing for people planning to have their own homes but do not exactly have the budget for one.  Thus, there are promotions or deals that allow as low as zero down payment for a house.  But then, these deals usually mean ‘hidden’ charges and fine print stipulations that homeowners should be wary of.  In order for them to get the best deals with current interest rates and mortgage insurance, a significant down payment should still be present in their mortgage. 

As mentioned earlier, there is what is commonly referred to as PMI, which stands for private mortgage insurance.  PMI is a cost that the prospective homeowner has to pay with the mortgage that aims to protect the lender in case the homeowner defaults on a payment.  For people who have taken advantage of a scheme with a very low down payment for a home mortgage, the lender does not have any assurance, since very little or no down payment has been given.  Thus, lenders charge PMI.  But for people who have given at least a 20 percent down payment or equity for their homes, lenders do not feel the need to charge the PMI, since they have a form of assurance in the down payment.

The issue with down payments is that even a 20 percent down payment can be a challenge for some people who dream of having a home.  For example, even for a house that has a $200,000 price tag, 20 percent of that will be $40,000, which is still a lofty sum for some people.  But then, as mentioned earlier as well, paying a down payment should be considered an investment as it will significantly lower interest rates and do away with other charges such as PMI. 

For people who are challenged to amass funds for a down payment for a home, there are some funding sources that may help.  For example, state housing authorities and the Federal Housing Administration have programs that assist families with low to moderate incomes, as well as those who are planning on buying a home for the first time.  There are also 401k and 403b plans that are usually for retirement that allow people to borrow funds from their account in case they want to purchase a home.  An account with IRA also entitles holders to some provisions that allow them to withdraw for home purchases if done for the first time.

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Real Estate Investing – Information and Understanding

Real estate investing is considered by most people to be a safe investment, since land is one commodity that rarely, if at all, devalues.  Moreover, if the location of the real estate to be invested in is prime or shows a lot of promise or potential for development, the investor’s money could multiply in time.  But then, aside from choosing a great location, it is also important for an investor to make sure that he or she is dealing with the right people.  These days, the real estate market has been attracting unscrupulous people that entice people, especially those who want to have their own real estate but are struggling, with their zero down payment schemes and other modus operandi.  The truth of the matter is, real estate brokerage is a challenging profession, and only a few people are qualified and licensed to deal with real estate.

For those who are serious about real estate investing, there are some factors that they need to have.  Of course, having the investment capital is important., as it is primarily the means to buy real estate.  If a prospective investor does not have it, at least he or she should have the means of getting some.  He or she just has to make sure that it would not make him or her be in serious financial trouble like being deep in debt.  Of course, when investing in real estate, just like any other undertaking, the person getting into it must have good knowledge of the market and the location where the prospective property will be bought.  As for the skills, the person needs to sharpen or develop his or her negotiating and management skills.  Moreover, he or she needs to know how to do repair work, or names of people who can do it for him or her.  Lastly, having an engineer, property inspector and a team of renovators should  come in handy.

But as mentioned earlier, the most important factor in  real estate investing is having capital.  Having one’s own house is one thing, but for people who want to buy several houses as a form of investment, a sizable amount of funding is necessary.  For example,  if an investor only has $250,000, he or she can buy a house for himself or herself.  However, if he or she has $500,000, he or she can buy two houses, one for himself or herself, and one to start the ball rolling with another house that can be rented out or sold, the proceeds of which can be used to buy another property. 

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Why Are You Thinking About Buying a Home?

Most people have agreed at this point that buying a home is a good idea rather than renting but do you know why? Why do you have the dream of buying a home when you don’t know why you’re doing it? Are you doing it because society tells you to?

Buying a home costs A LOT of money. There’s a down payment, closing costs, repair costs, mortgage payment, taxes and monthly bills that exceed those of an apartment.

One of the main reasons to buy a home are due to restrictions placed upon you by the apartment complex you’re in. If you owned your own home “you could do whatever you want” right? Other people wouldn’t be living down the hallway from you either.

The second reason that people buy a home is because they say it’s an investment. The problem with that is this: If you buy a 2 bedroom home at $200,000 and 4 years later your home is worth $300,000 then you’d be able to sell it for a profit, but you still need a place to live and all other 2 bedroom homes went up to $300,000 as well. So your primary residence is not really an investment.

The investment would be a second home bought for $200,000 that goes up to $300,000 and you sell it to pocket $100,000 and continue living in your first home. Buying a home is a great financial decision but not an investment.

Your reasons for buying a home should be:

1) To relieve yourself of a monthly mortgage payment or rental payment completely. That means you’ll put all of your extra money towards your home to eventually pay it off. Although most people pay down $20,000 and then realize what they’ve done and get a home equity loan for $20,000 and now they’ve gone back to square one.

I GET SO FRUSTRATED WITH PEOPLE AND BANKS!

People get sucked into these home equity loans and interest only loans and then go blow $20,000 on nothing. All because they can’t save on their own for what they want.

Remember, banks are in business to loan YOU money and a “sale” for them is your home equity loan. The longer the term the more money they make. Hence the invention of the 40 year fixed rate mortgage…

2) The second reason I’d buy a home is to buy a second home as an investment and rent it out. Then it’s just an investment and I’ll use the profits to pay down my first mortgage. If you’re thinking about buying a second home to rent then take a look at my real estate investing section to figure out how. You’ll need to figure out your borrowing power with the bank first to be sure you can be approved for a second loan. My free mortgage calculator will help you with that calculation.

If you’re taking out a home equity loan for $20,000 then just be sure to use it wisely. Use it for a down payment for your second home, use it to start a business or even use it to pay off credit cards so that you have a lower interest rate.

Remember to buy a home for a reason. There are a lot of people out there right now being foreclosed on because they lost their job and can’t afford the monthly mortgage payment. So be sure about what you want and then it will be a good financial decision that you understand and want to accomplish.

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Should I spend All of my Savings on the Down Payment?

Buying your first home can be an exciting and overwhelming experience. You’ve managed your money and credit and have a great score, so you’re certain that you’ll get a great rate. You’ve also accumulated a nice down payment. And you may be wondering: Should I spend all of my savings on the down payment?

          It may be a hard decision whether to put all your savings into a down payment, especially if the extra cash will get you a better interest rate. The good news here is that some of this decision comes down to math. If you’re on the fence, check out a mortgage calculator. Use this prevalent online tool to see just how much you would actually save over life of the loan by inputting varying down payments.

          If home-ownership is your goal, then you know that buying a home takes more than a down payment and a good credit score. If you put all your money down on the home, will there be any left over in case of an emergency? Think about it. If you should fall ill after you’ve taken on a mortgage and have no savings, how will you pay the mortgage? How will you eat? Most financial professionals recommend an emergency fund amounting to at least 6 months of expenses. If your mortgage payment is $1000, then you’ll need $6000 just to cover the mortgage, not to mention food, insurance, utilities and car related expenses. It can add up fast.

          You’re buying a house, right! You may need that money for repairs, furniture, property tax or higher utility costs. You may be surprised by some of the expenses that may pop-up. In the end, every financial situation is different, be sure to thoroughly assess yours before making such big decision.

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