There are all sorts of obstacles that you have to deal with when you find yourself in the market for purchasing a new home. A number of different studies have been conducted which have all concluded that the most difficult challenge to becoming a homeowner is pulling together enough money for the down payment. The real question is: what exactly is a down payment anyway?
What is a Down Payment?
A down payment is an amount of money that you (as the buyer) pay out of your own pocket towards purchasing the house. The next question a person has is how much money that usually ends up being. The general rule of thumb is that you should always try to pay at least 20 percent. This is a golden standard that has been around for decades of purchasing houses. Why 20 percent? What makes that a magic number?
Increases Chances of Getting a Mortgage
Most mortgage providers require you to be able to prove that you can come up with at least 20 percent of the total cost of the home on your own before they will consider giving you a mortgage. Making a down payment of at least 20 percent is the easiest way to show the bank you are trying to get the mortgage through that you are capable of doing that.
Smaller Mortgage Payments
Everyone likes smaller bills right? The more money you put on as a down payment, the smaller your mortgage payment is going to be every month. This is because the more money you use to buy the house, the less money you have to borrow.
If you are trying to decide whether or not it is the right time to purchase a house, you just need to ask yourself whether you can pay 20 percent of the asking price. If you can, then you are ready to purchase a house.
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