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With mortgage rates at their 20 year low, it might make sense for a renter to consider purchasing a home. Often times the mortgage payment will be equal to or less than the rental payment. A portion of every mortgage payment is applied towards principal thus resulting in a built in savings plan.
The downpayment is the amount of money a buyer needs to pay toward the purchase of a home. This amount is a percentage of the purchase price. The minimum downpayment is typically between 3 to 5%. A downpayment of 20% or more will eliminate the requirement of private mortgage insurance. Private mortgage insurance (PMI) insures the lender in the event of borrower payment default. There are options of putting down 10% and avoiding private mortgage insurance. One of these options is called an 80/10/10 loan. Keep in mind a portion of the downpayment may be made in the form of a gift. Lenders have specific gift guidelines on how much may be gifted and from whom.
The interest portion of a mortgage payment will have tax deduction benefits. In order to find out specifically what your tax deduction might be, you need to consult your tax advisor.