The Importance of the Down Payment

Here is some sound advice from Alan Kennedy of Cornerstone Lending:Image

 

When buying a new home we are mainly focused on the price of the home, the square footage, the number of bedrooms and the neighborhood. We are not as focused on the down payment, which is crucial, as it affects your monthly mortgage payments and interest.

It is generally suggested that your down payment is at least 20% of the price of your new home. This amount is subtracted from the total price of the new home and the remaining amount will be your mortgage amount.

If you are able to pay more than 20% you will be able to borrow less money, meaning you will be paying less interest.

Also, if you are able to pay 20% or more, you will not have to have pay PMI, which is Private Mortgage Insurance, also known as LMI, or Lenders’ Mortgage Insurance. This is insurance which protects the lender if you default on your loan, but is not usually required if your mortgage is 78% of your home price or less.

Having a little discipline up front and saving up for a higher down payment can save you substantial money on your mortgage.

 

Learn more about PMI insurance:

http://www.nolo.com/legal-encyclopedia/private-mortgage-insurance-pmi-30108.html

See the effects of a larger down payment with this mortgage calculator.

http://www.mlcalc.com/

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About christinahammondhomes

Christina Hammond is currently a real estate agent for Keller Williams Greater Athens in Athens, Georgia. Her interests in real estate began when she was an undergraduate at Arizona State University, where she studied business and psychology. During her years at ASU, she apprenticed with one of the top producing real estate brokers in the area, learning the details of real estate sales in a large metropolitan area. This practical experience, combined with her university studies, further increased her interest in real estate as a career. Christina excels in developing close working relationships with clients that often grow into long term friendships. She has 15 years of real estate experience, the last 8 in the Athens area. As in Phoenix, she has fostered many connections with her clients and finds this part of her work more satisfying in this smaller venue. As Christina says, “It is enormously rewarding to help a client find a home that is right for them. Homes are the physical manifestation of many people’s dreams, and it is hard to express the satisfaction of helping someone find a home that they love.” Of course, selling real estate requires shrewd understanding of the market and competing forces. Such skills were honed through her academic experience, understanding legal contracts, business negotiations, market competition, etcetera. But from Christina’s perspective, real estate is fundamentally about the people, rather than just buying and selling. When she is contracted, her obligation to her client is paramount, and she will represent them as assertively as is necessary. Christina states, “You learn quickly that in a big city, as well as a smaller community, a great agent must be thorough and aggressive, so that the client can know that their interests are being managed effectively, and it allows them to relax and focus on the big picture.”
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