AEM Mortgage Minute with Deanna Daughhetee

Don’t Let a Limited Down Payment Get You Down

Friday, April 27, 2007

When contemplating purchasing a home, people often wonder if they make enough money to afford one. That is a worthwhile consideration, of course. However, most homebuyers discover a bigger limitation-the amount of cash they have on hand to make a down payment. In recent years, many lenders have lowered their down payment requirements. In some cases, borrowers can obtain a mortgage with either no down payment (as with VA-guaranteed loans, available only to veterans) or with a very low down payment (as with FHA-insured loans). Most lenders have also developed conventional loans that may require little or no down payment. These options are not available to all homebuyers, however, and most borrowers will likely be required to make a down payment to secure their mortgage. Down payment requirements vary from loan to loan, but they are typically higher when the mortgage is considered to be more of a risk to the lender. Lenders generally like for borrowers to meet the down payment requirement with their own funds. This helps assure the lender that the borrower has the ability to save money and the capacity to pay off the loan. Therefore, lenders may restrict the amount of the down payment that is provided to the homebuyer as a gift. If homebuyers plan to receive help from parents or other family members, it must be a gift that is verifiable. Whatever your down payment situation, there are a number of loan options available. Be sure to ask your American Equity Mortgage loan officer for the mortgage programs that best suit your needs.