A down payment is very important when you are buying a home because it can lower your monthly mortgage payment and also build your credibility with the bank. In this economy the banks are looking for a 15-20% down payment because the real estate market has been going down. As the market goes down the bank has less of a chance to get their money back if you don’t pay the loan.

Your down payment will also increase the amount you can buy because it will be less of a monthly payment. The amount you can borrow from the bank is based on your monthly income so if your mortgage payment is less then you can afford more of a home.

If you don’t have 20% down then I suggest trying to get approved for a much smaller loan. If you have a very low debt to income ratio and a good credit score then the bank will be more likely to approve you. You can use a mortgage calculator to figure out a monthly amount you can afford. You can also find the current interest rates online to make sure you have the correct information to plug into the calculator.

Sometimes people will take out a home equity loan to use it as a down payment on an investment property. When you are buying a home to rent it out then you will need at least 20% down and sometimes even 25% because it’s a much higher risk for the bank.

The bank would like you to approve for the loan with under a 40% debt to income ratio without the new rent money as income. Once you have had a renter for about 6 months the bank will include that as income if you want to buy a third home.

Author: Chris G Bell
Article Source: EzineArticles.com
Provided by: Bumper guardian

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