Can you buy a home for Lesser Down payment

Dated: January 30 2021

Views: 188

What is a minimum down payment

A down payment is the amount of money you put towards the purchase of a home. Your lender deducts the down payment from the purchase price of your home. Your mortgage covers the rest of the price of the home.

The minimum amount you need for your down payment depends on the purchase price of the home.

If your down payment is less than 20% of the price of your home, you must purchase mortgage loan insurance.

If you’re self-employed or have a poor credit history, your lender may require a larger down payment.

Normally, the minimum down payment must come from your own funds. It’s better to save for a down payment and minimize your debts.

Example: How to calculate your minimum down payment

The calculation of the minimum down payment depends on the purchase price of the home.

If the purchase price of your home is $500,000 or less

Suppose the purchase price of your home is $400,000. You need a minimum down payment of 5% of the purchase price. The purchase price multiplied by 5% is equal to $20,000.

If the purchase price of your home is more than $500,000

Suppose the purchase price of your home is $600,000. You can calculate your minimum down payment by adding 2 amounts. The first amount is 5% of the first $500,000, which is equal to $25,000. The second amount is 10% of the remaining balance of $100,000, which is equal to $10,000. Add both amounts together which gives you total of $35,000.

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