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Glossaries »
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Down Payment Converts your High Ratio Mortgage into Conventional Mortgage! Things Before You Apply for a Mortgage Loan
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Mortgage Down Payment
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The Down Payment is the amount of your home's purchase price you need to supply up front in cash to get your loan. Your loan payment schedule depends on your upfront money you paid for your mortgage, maximum the down payment, maximum is the saving. However, the less you need to borrow, the less interest you will have to pay. You should have a clear idea about how much you can affoard to invest towards the down payment before talking to a potential lender or a broker.
There are many factors such as the type of house, cost, geographic location and other, that effects your down payment. Usually, the minimum down payment required for the purchase of a single home or a condominium is five per cent, 2-unit home or duplex is 7.5 per cent and for a 3-unit home or triplex and or 4-unit home is 10 per cent of the accepted purchase price or appraised value, whichever is lower.
Your down payment also effects your mortgage while contributing towards the purchase low or high in per centage. If your down payment is less than 20 per cent, your mortgage is considered as a high-ratio mortgage and if your down payment is 20 per cent or more, your mortgage is considered as a conventional mortgage. Moreover, as a mortgage lender, you are required by law to purchase a mortgage loan insurance or default insurance in case of a high-ratio mortgage. But on the otherhand your conventional mortgage don't require any legal formality of insurance. However, despite the fact, you may be asked by your lender to get a default insurance over your mortgage because as a high-risk loan.
The down payment amount must be your own savings and must not come from any financial liability that carry loan or borrowing, such as a line of credit, personal loan or credit card. Otherwise a higher mortgage loan insurance premium will apply.
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Previous and Current Credit Rating both will determine your Creditability with the debt w
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