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Sunday, April 16, 2006

Down payment

The portion of a property’s purchase price that buyers must pay up-front with their own money

Lenders prefer that you make at least a 20% down payment when buying a home. This amount serves to protect the lender in case you can’t make payments (default) on your loan. If you can’t make the 20% cash down payment, and most first-time buyers can’t, there are financing options that can cut down the amount.

Three common choices are:
(1) private mortgage insurance,where you pay a fixed monthly premium in return for a lowerdown payment
(2) government-insured loans that let you put down less, but limit how much you can borrow and
(3) piggyback loans, which require a 10% down payment. You get 2 loans, one for 80% of the purchase price and the other,usually at higher rate, for 10% of the purchase price.
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