Understanding the Requirements for Down Payment
You and the Down-payments!
The Dusty papers and the rusty inspections are done with, and that nostalgic feeling is saying you’re set for claiming your home? Not so soon. Agreements don’t execute themselves; people do. There is still much work to be done.
Now that you are approved, it is time to step up the game towards settling the costs. You will have to begin with your down-payment.
Down payments are the minimum amount stipulated for deposit in respect of a mortgage. It is to be paid by a buyer, and it is the first monetary step towards securing the property for yourself. If you delay with your down payment, you may lose the property.
Down-payments are usually a fragment of the actual principal debt, running from 5% to 20% depending on the terms of the mortgage.
Items you need for you’re a hitch-free down-payment:
- Your Bank Statements usually for three to six months
- Your down payment must be from your savings and not a loan in itself
- If it is a gifted sum of money, you must show proof that it is a lump of money that is not refundable.
- You must also prove closing costs too.
Various Ways to Fund Your Down payment
You have a variety of options:
- Pay Cash
You can pay cash straight out of your offline pocket (If you know what we are saying). Paying cash saves you some of the stress you will encounter declaring your funding source (because large deposits above $1000 will need to be defended in the bank).
- Pay with a Gifted amount
Nothing stops you from paying your down payment with a gift; however, you must endeavor to consider the rules governing down payment payable by donations.
- The fund must be given freely with no implied or express term of repayment
- The donor must be a relative
- The gift must not be partly (no matter how insignificant that part payment is) or entirely donated by a person interested in the mortgage (whether direct or indirect interest).
- Also, you will need to confirm that the gift was in your account, at least 15 days before the closing date. That is to make sure it was gifted independent of the mortgage.
- Don’t forget your statement of account will be requested too.
Furthermore, you can make your down payment from your home equity. If there is value left off your current or past mortgage, you can use it for your down payment. Let’s take an example; if your former home is worth $150,000, and you have paid your mortgage up to $75,000, you have $75,000 left as your home equity. When you sell off the house, the extra can be used to finance the down payment for your new mortgage. This is only one option, you can alternatively, choose to refinance the loan too.
Closing Costs – Something to check out for
Ever encountered costs like:
Land Transfer tax,
ü Cost for appraisal.
If you have experienced these costs, there’s a 100% chance that there were some you didn’t see coming at all. That’s closing costs for you.
Closing costs are peculiar, depending on the kind of mortgage you are taking. Experts have estimated the closing cost to be as much as 1 – 2% of the actual purchase price. So, you see why you need to prepare for them?
Well, that’s why we are here, keep a list for your closing costs and plan them along with your purchase price, you will save yourself the distress that comes with some extra, unforeseen expenses.