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    <title>Down payments</title>
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    <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Finance-a-Home/Down-payments.aspx</link>
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    <lastBuildDate>Fri, 29 Aug 2008 16:34:06 EST</lastBuildDate>
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    <item>
      <title>Buying a home with a low down payment</title>
      <description>Looking for a mortgage that doesnÂ’t require a 20 percent down payment? Here are some options.</description>
      <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Special-loan-programs/Buying-a-home-with-a-low-down-payment.aspx</link>
      <pubDate>Mon, 31 Dec 2007 10:30:01 EST</pubDate>
      <category>Down payments</category>
      <guid>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Special-loan-programs/Buying-a-home-with-a-low-down-payment.aspx</guid>
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Buying a home with a low down payment
Looking for a mortgage that doesnÂ’t require a 20 percent down payment? Here are some options.
<p>You've found a home you'd love to own, and you're ready to buy. But you don't have a 20 percent down payment. Don't worry; there are several low-down-payment alternatives. <br />
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<strong>Private mortgage insurance</strong> <br />
It's possible to get a mortgage with a down payment of as little as 3 percent by taking out private mortgage insurance (PMI). This insurance protects the lender in case you default on your mortgage payments by ensuring that the outstanding balance will be paid off. <br />
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The cost of PMI varies but, in general, it's about one-half of one percent of the mortgage amount per year, or $500 for a $100,000 loan. The good news is that once you've paid down your mortgage to the point where you achieve 20 percent equity in your home, most lenders will allow you to cancel the insurance. You may also be able to drop it if an updated appraisal indicates your equity has increased sufficiently due to an increase in the value of your home. <br />
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PMI can sometimes be financed through your mortgage loan (often called a self-insured mortgage). You will likely have to pay a higher interest rate, but the payments are usually tax-deductible as mortgage interest. <br />
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<strong>FHA loans</strong> <br />
A second option is to apply for an FHA mortgage. These loans, designed for those with less-than-perfect credit, are insured by the Federal Housing Administration and also allow a down payment as low as 3 percent. <br />
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The down payment can be a gift from a family member, government agency or non-profit organization. However, there is a limit to the amount you can borrow, which varies depending on your location. You will also be required to take out FHA mortgage insurance. In most cases, this insurance costs 1.5 percent of the loan amount on closing, plus 0.5 percent per year -- the amount can be rolled into your mortgage. <br />
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On a $100,000 mortgage, the 1.5 percent upfront FHA mortgage insurance payment would be $1,500 which, wrapped into a fixed, 30-year mortgage at 8 percent, would come to an additional $11.01 per month. The 0.5 percent annual premium would be $500 per year or $41.67 per month. <br />
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Government-insured loans are also available for those with military service under the Veterans Administration (VA) loans program, and for rural residents under the Rural Development Housing and Community Facilities program. <br />
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<strong>Piggyback loans</strong> <br />
Also called a second trust loan or second mortgage, a piggyback loan is a second loan that closes at the same time as your first mortgage. The idea is to combine this loan with your down payment in order to reach the 20 percent needed for a conventional mortgage. <br />
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The most common piggyback loan is an 80/10/10: your mortgage equals 80 percent of the purchase price, and your second trust loan and down payment each equal 10 percent. There are also 80/15/5 loans, which require you to put down only 5 percent. <br />
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With this arrangement, you'll have two loans to pay each month. And the interest rate on the second trust loan will likely be higher than that of your first mortgage. In addition, paying the closing costs on another loan will add to your upfront expenses. But your total payments may be less than they would be if you were paying for PMI. Plus, the interest on a piggyback loan may be tax-deductible, though you should consult a tax advisor about your situation. <br />
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      <title>Piggyback loans let you tap your home equity when buying</title>
      <description>Homebuyers can use a second mortgage or line of credit to help with a down payment, or to finance other needs and wants.</description>
      <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Down-payments/Piggyback-loans-let-you-tap-your-home-equity-when-buying.aspx</link>
      <pubDate>Tue, 11 Sep 2007 10:30:00 EST</pubDate>
      <category>Down payments</category>
      <guid>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Down-payments/Piggyback-loans-let-you-tap-your-home-equity-when-buying.aspx</guid>
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Piggyback loans let you tap your home equity when buying
Homebuyers can use a second mortgage or line of credit to help with a down payment, or to finance other needs and wants.
<p>A "piggyback" loan is usually defined as any type of second loan that's closed at the same time as your first mortgage. The piggyback may be a traditional second mortgage known as a home equity loan, a home equity line of credit or some combination of a loan and a credit line. <br />
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<strong>Piggybacks serve various purposes</strong> <br />
Homeowners take out piggyback loans for a variety of reasons when they purchase their home or refinance their mortgage. Many buyers use piggybacks to avoid mortgage insurance that's required with a down payment of less than 20 percent of the purchase price of the house. Others may want to repair or remodel their home, buy a vacation home or new vehicle, fund a college education or meet major medical expenses. <br />
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A home equity loan is the usual means to avoid mortgage insurance or borrow a set sum of money for a long period of time, while a home equity credit line is useful to meet variable or relatively short-term financial needs. <br />
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<strong>Loan offers predictability; line offers flexibility</strong> <br />
A piggyback loan typically has a fixed term and interest rate, though some loans have adjustable interest rates. Fifteen-year terms are common, though five-year, 10-year and other terms may also be available. <br />
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A piggyback credit line typically has a term of 15, 25 or 30 years and a variable interest rate. Unlike a loan, a credit line usually doesn't have a fixed balance, but rather can be drawn upon at need and paid off at will during the term. Some credit lines allow you to convert a chunk of debt into a loan with a fixed interest rate and term. <br />
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Some lenders offer very low short-term "teaser" rates on credit lines as an inducement to homeowners. If you're considering a credit line as a piggyback loan, be sure to consider not only the teaser rate, but also your ability to repay the debt when the rate increases after the low teaser rate expires. <br />
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The interest on a piggyback loan or credit line may be deductible as home loan interest expense on your income tax return. Consult a tax advisor to find out whether that benefit is applicable to your individual situation. <br />
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Loan products can be complicated, so it's very important to be sure you understand how your loan is structured. <br />
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<strong>Be wary of high fees on piggyback borrowing</strong> <br />
Piggyback loans and credit lines typically are offered with very little or even no closing costs, so be wary if closing costs or fees seem excessive. Some credit lines require a minimum balance or come with an annual or per-transaction fee. <br />
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The maximum amount you'll be able to borrow will depend on the value of your home, the balance on your first mortgage, your credit history and other factors. Home equity loans and credit lines can be cheaper than other types of debt, but you could lose your home if you're unable to repay your debt. </p>
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      <title>Down payment: What is the purpose?</title>
      <description>Why do lenders want a down payment when you purchase a home? It's all about security.</description>
      <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Down-payments/Down-payment-What-is-the-purpose.aspx</link>
      <pubDate>Mon, 27 Aug 2007 13:51:26 EST</pubDate>
      <category>Down payments</category>
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Down payment: What is the purpose?
Why do lenders want a down payment when you purchase a home? It's all about security.
<p>It's standard procedure to make a down payment on a home at closing, and lenders have a good reason for wanting you to make one. </p>
<p><strong></strong></p>
<p><strong>Security for the lender</strong> <br />
A down payment provides security for the lender. If you put a significant amount of your own money into a home, you are less likely to walk away and default on the loan. Lenders, understandably, want to make sure that they'll be repaid; your down payment provides that reassurance. </p>
<p><strong></strong></p>
<p><strong>Easier loan approval for you <br />
</strong>Another reason for lenders wanting a down payment involves loan approval. Your down payment makes it easier for you to qualify, and the more money you put down, typically, the easier it is for you to be approved. Though it may be possible now to obtain a loan with no down payment whatsoever, qualifying for a loan is a lot easier if you're able to make a down payment. </p>
<p><strong></strong></p>
<p><strong>Building your equity <br />
</strong>When you make a down payment on a home, you're building equity (the percentage of the property you actually own). And the more you put down, the greater your equity. The more equity you have, the less you need to finance and the less overall interest you will need to pay on your loan. A down payment therefore benefits not only the lender, but you as well. </p>
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      <title>Is your down payment too big?</title>
      <description>It may not always be in your best interest to make the largest down payment you can when buying a home.</description>
      <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Down-payments/Is-your-down-payment-too-big.aspx</link>
      <pubDate>Thu, 21 Jun 2007 16:30:23 EST</pubDate>
      <category>Down payments</category>
      <guid>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Down-payments/Is-your-down-payment-too-big.aspx</guid>
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Is your down payment too big?
It may not always be in your best interest to make the largest down payment you can when buying a home.
<p>For many people, especially those buying their first home, it may seem as if the larger the down payment they can make, the better. But there's a point where your deposit could be too large given your financial situation. Before emptying out too much of your savings account, ask yourself the following: Are you going to have enough left over to cover <a target="_blank" href="http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Mortgages/Budgeting-for-closing-Costs-and-fees-to-get-a-mortgage.aspx">closing costs</a> and moving expenses? Have you retained enough to serve as an emergency cushion in case something in your new home breaks down or your car quits? You may discover you're better off keeping some of your savings right where it is.  <br />
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<strong>Start with the minimum</strong> <br />
A 20 percent down payment has long been considered the standard when buying a home. Lenders do approve mortgages with smaller upfront payments -- some even offer zero-down loans. But most experts agree that if you can put 20 percent down, you should. <br />
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Lenders offer more favorable interest rates to home buyers who make a down payment of at least this size. What's more, you're more likely to attract offers from several lenders and to find a mortgage with a good interest rate and the terms you want. <br />
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A 20 percent down payment also allows you to avoid added costs. When you borrow more than 80 percent of your home's value, lenders require you to purchase private mortgage insurance (PMI), which typically costs about half a percent of the loan's principal -- about $83 per month on a $200,000 mortgage. You can avoid these premiums by putting 10 percent down and getting a second "<a target="_blank" href="http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Private-mortgage-insurance/Which-is-better-PMI-or-piggyback-loan.aspx">piggyback</a>" loan for the remainder, but this too comes at a price. A 20 percent down payment sidesteps both of these additional charges. <br />
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<strong>Determine the maximum</strong> <br />
So, should you make a down payment larger than 20 percent? It's true that every extra dollar you put down reduces your monthly payment and the amount of interest you'll pay over the life of the loan. But you may be surprised at how the numbers break down. <br />
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<strong>1. Consider how much interest you will save</strong> <br />
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Assuming you're buying a $200,000 home with a 6 percent mortgage amortized over 30 years: <br />
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<table height="150" cellspacing="2" cellpadding="2" width="250" align="left" summary="" border="1">
    <tbody>
        <tr>
            <td>
            <p align="center">Down Payment</p>
            </td>
            <td>
            <p align="center">Loan Amount</p>
            </td>
            <td>
            <p align="center"> Payment  </p>
            </td>
            <td>
            <p align="center"> Interest Saved </p>
            </td>
        </tr>
        <tr>
            <td>
            <p align="center">20%</p>
            </td>
            <td>
            <p align="center">$160,000</p>
            </td>
            <td>
            <p align="center">$959</p>
            </td>
            <td>
            <p align="center">-</p>
            </td>
        </tr>
        <tr>
            <td>
            <p align="center">25%</p>
            </td>
            <td>
            <p align="center">$150,000</p>
            </td>
            <td>
            <p align="center">$899</p>
            </td>
            <td>
            <p align="center">$1584</p>
            </td>
        </tr>
        <tr>
            <td>
            <p align="center">30%</p>
            </td>
            <td>
            <p align="center">$140,000</p>
            </td>
            <td>
            <p align="center">$839</p>
            </td>
            <td>
            <p align="center">$3168</p>
            </td>
        </tr>
    </tbody>
</table>
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<p><br />
</p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p>As you can see, an extra $10,000 down saves you $60 a month, and an additional $20,000 will put $120 a month in your pocket. That sounds great until you consider that it will take almost 14 years for these savings to equal your initial outlay. And the overall interest savings, while significant, will be spread over three decades, amounting to just a few dollars a month. <br />
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<strong>2. Ask yourself the following questions:</strong> <br />
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<strong>Would you be better off using the money to cover other expenses?</strong> <br />
Think about how $10,000 or $20,000 might be put to better use. Settling in to a new home is often more expensive than new owners bargain for. Don't forget that reputable movers can easily charge over $1,000 -- far more if you're moving between cities. If you're purchasing a larger home, you'll likely need some new furniture. You may decide that the bathroom you thought you could live with needs to be gutted. Paying these costs with cash rather than your credit card can save you a bundle. <br />
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<strong>Should you keep the funds available in case of an emergency?</strong> <br />
You might also want to stash that money in a <a target="_blank" href="http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/HighYieldSavings/HighYieldSavings.asp">high-yield savings account</a> -- a decision that might one day end up saving your home. If you, or your partner, ever lose your job, this emergency fund will allow you to make your mortgage payments until you're back on your feet. </p>
<p><strong>Have you retained enough to cover all of the required closing costs?</strong> <br />
You will need to set aside a little extra to cover all of the closing costs associated with a mortgage. These will be listed in the <a target="_blank" href="http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Mortgages/The-Good-Faith-Estimate.aspx">Good Faith Estimate</a> of costs that your lender is required to give you within three days of your application. <br />
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<strong>Will a larger down payment reduce the interest rate of your loan?</strong> <br />
There are situations when a down payment larger than 20 percent may be a smart choice. If you have a blemish or two on your credit report, more money down may encourage a lender to give you a better rate. <br />
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<strong>What is your personal attitude towards debt?</strong> <br />
If you'll have more peace of mind with a smaller loan and more home equity, that's a personal choice no one should dissuade you from. <br />
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<strong>Do the terms of your mortgage allow you to make prepayments?</strong> <br />
Remember that a large down payment isn't the only way to reduce your mortgage and increase your equity. Many lenders allow you to make prepayments (extra payments to help you pay your loan off faster) once a year. After you've been in your home for a while, if you decide you really do want to knock down your mortgage, this feature will allow you to still do so. </p>
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      <title>Which is better: PMI or piggyback loan?</title>
      <description>Here's how to weigh your options if you plan to buy a home with a down payment of less than 20 percent.</description>
      <link>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Private-mortgage-insurance/Which-is-better-PMI-or-piggyback-loan.aspx</link>
      <pubDate>Thu, 22 Feb 2007 10:30:00 EST</pubDate>
      <category>Down payments</category>
      <guid>http://www.emjcd.com/click-1762781-10499354?url=www.lendingtree.com/smartborrower/Private-mortgage-insurance/Which-is-better-PMI-or-piggyback-loan.aspx</guid>
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Which is better: PMI or piggyback loan?
Here's how to weigh your options if you plan to buy a home with a down payment of less than 20 percent.
<p>Homeowners who make a down payment of less than 20 percent are usually required to pay private mortgage insurance (PMI), because they are considered to be at higher risk of default. PMI premiums are typically around half a percent of the interest rate, which is about $83 a month on a $200,000 mortgage. <br />
<br />
Piggyback loans were created as an alternative to this extra expense. With this strategy, the homeowner makes a 10 percent down payment, gets a mortgage for 80 percent of the home's value, and then takes out a second loan for the remaining 10 percent. Because no single loan exceeds 80 percent of the property's value, PMI isn't required. The combined payment of the two loans may be less than the cost of a single mortgage plus PMI, especially since the interest on a piggyback loan may be tax-deductible. <br />
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In recent years, piggyback loans -- which are sometimes structured as home equity lines of credit -- were so attractive that mortgage insurance companies were losing customers in droves. But two important things have happened to even the playing field. First, the prime rate (the rate these loans are most often tied to) has more than doubled since the summer of 2004, while mortgage insurance premiums have stayed about the same. Second, a new federal law allows some taxpayers who buy a home in 2007 to deduct their PMI premiums. These two changes have closed the price gap between the two options. <br />
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For example, let's say you're purchasing a $250,000 home with a down payment of 10 percent and have opted for a 30-year fixed-rate mortgage at 5.75 percent. <br />
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Here's how your choices might look: <br />
<br />
<strong>Option 1: <em>You take out a mortgage for 90% of the home's value ($225,000) and pay PMI.</em></strong><em> <br />
</em><br />
Mortgage payment: $1,313.04 <br />
PMI premium (0.5%): $93.75 <br />
Total monthly payment: $1,406.79 <br />
<br />
<strong>Option 2: <em>You take out a mortgage for 80% of the home's value ($200,000), plus a piggyback loan for the other $25,000. <br />
</em></strong><br />
Mortgage payment: $1,167.15 <br />
Piggyback loan payment (8.5%): $192.23 <br />
Total monthly payment: $1,359.38 <br />
<br />
In this case, the monthly payment is almost $48 lower with Option 2, though the piggyback loan may carry origination fees that add to the cost of this option. In addition, if you are able to claim your PMI premiums, you may be able to get a larger tax deduction with Option 1. A small change in any of the interest rates used in this example can also tip the balance in the other direction. <br />
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A few caveats about the new law, which companies selling PMI have long lobbied for. It allows taxpayers to deduct PMI premiums as long as their adjusted gross income is $100,000 or less. It applies only to people who purchase a home in 2007. It is unclear whether or not the law will be extended into 2008 and beyond. If you're already paying premiums on an existing mortgage, you can't claim the deduction. <br />
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If you're planning to buy a home with a down payment of less than 20 percent in 2007, talk to an accountant or tax adviser who can help you determine which option is the least expensive in your particular situation. </p>
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