The Lowdown on a Low Down Payment Mortgage

Owning a home is everyone's goal. But many people have this mistaken belief that the way to that dream is hindered by a mortgage loan prerequisite that’s hard to meet – the down payment. They think that they need to come up with a down payment equal to 20 percent of the price of a home before they get a chance at home ownership. What these people do not realize is that they can buy a home with a down payment much lower than that.

Although mortgage lenders traditionally require a down payment of not less than 20 percent, they also grant qualified homebuyers with loans that require only 3 to 5 percent of the buying price. But this is only possible as long as there is mortgage insurance, which protects the mortgage lender against financial loss if a homeowner ceases making payments. This type of loan is called the low down payment mortgage, and it's getting popular with the millions who find it hard to come up with a larger down payment.

The people who can avail of a low down payment mortgage include the following:

· First-time homebuyers, who may find the low down payment mortgage the only way to buy a house and start to build equity;
· Fixer-uppers, homebuyers who instead of putting money down, use the cash to make improvements and increase the value of the house and the buyer's equity;
· Those who have somewhere better to invest their money, like a sound investment earning a higher interest rate than the mortgage rate.

These are the prerequisites you need to comply with before you apply for a low down payment mortgage:

· Adequate income that enables you to support your monthly mortgage dues;
· Enough cash to cover the down payment, normal closing costs and expenses related to it;
· A good credit background that provides an indication of your payment history;
· Sufficient appraisal value that determines the house is at least equal to the purchase price;
· In some cases, cash reserve that's equal to two monthly mortgage payments.

Before you start looking at houses, it is recommended that you get a lender's preapproval first. In a preapproval process, the lender examines your credit, reviews your income and gives you a formal approval. Also, prior to applying for a mortgage loan, you need to undergo the process of prequalification, which involves determining the size of the loan you qualify for. By prequalifying, you will know up front the price range you can afford before you begin your search for a house you want to buy.

To make sure that you have the best deal, shop around for the best mortgage. Learn about the different options before making a decision. Aside from that, you should also compare lenders and the various products it offers. Check certain pointers like:

· When you pay less down payment, will you be paying a higher interest rate?
· Will you be paying for a higher mortgage insurance premium in exchange for a low down payment?
· Does a low down payment entail additional fees and charges?

Through the low down payment mortgage, more consumers will be able to enjoy the perks that come with home ownership including personal satisfaction, tax savings, stability for you and your family an investment in the future.