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The American dream of owning your very own home is, in most cases, just that: a dream, if you do not have the required down payment to buy it. Down payments are a useful instrument for lenders who want to ensure the borrower has the financial wherewithal to pay the loan’s monthly payments. By paying a down payment the borrower is immediately creating equity for the lender so that if the borrower defaults on the mortgage some of the expenses of foreclosure and reselling the property are covered. Of course, a down payment also helps buyers reduce the interest paid on their mortgage and speeds up the repayment process.
However, down payments are also a huge barrier for many families who may be able to afford the monthly payments of a mortgage but struggle to put together the money for a down payment. Nevertheless, owning your home continues to be one of the main financial goals of American families. In the United States two-thirds of all households own their home. So, if you feel you will never be able to buy a home because you don’t have the cash for a down payment, you can be sure that many others have been in your position and are now homeowners.
This series of articles will look into one of the main obstacles to getting a mortgage and buying a home: the down payment and how buyers can go about finding the resources to pay for it. However, our first question is much more general and one all home owners should ask themselves before applying for a mortgage. The question is: Why Buy A Home? The truth is buying a home is not for everyone. Although buying your own home can provide personal satisfaction, tax savings, a sense of community, stability and an investment in the future, it doesn’t come without its issues. Buying a home comes with added expenses, such as property tax, general maintenance and repair expenses.
However, if you are reading this article, you are probably already sure about the benefits of buying a home and simply require a little help to find the down payment you need to get the ball rolling. The truth is the typical 15 to 20 percent down payment is simply too much money for most families to save. For instance, a family might be able to afford an $800 to $1,200 mortgage payment for a $300,000 home, but find it impossible to cover the $60,000 down payment traditional lenders require. Thankfully there are methods you can follow to reduce a down payment to 5 or even 3 percent of the property’s price. Our next article will explain how you can get lenders on board and pay less for your down payment regardless of where you live and the value of your home. .
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