Purchasing a new house is an exciting time! Most of us only purchase 3 houses in our lifetime, so this can also be very scary and overwhelming. You have enough to worry about with the movers, setting up the utilities, packing, etc. that we want the loan process to be as smooth and seamless as possible.
When you purchase a house, the amount that you will need to bring to closing is: 1. Down Payment (sometimes not needed), 2. Closing Costs (lender costs, title fees, recording charges, etc.), and 3. Pre-paids (mortgage interest, property taxes, and homeowner’s insurance).
Your down payment will depend on your situation. You can discuss with your loan originator to determine what the minimum down is as well as the advantages of a larger down-payment. If you don’t put the 20% down, you will typically be required to have a mortgage insurance feature on your loan. This could be a lump sum upfront or the traditional monthly mortgage insurance. There is also the ability to do a second mortgage to help avoid this. Everyone’s situation is different, so the best option for one person might be different than someone else (keep this in mind when that nosey co-worker is boasting about their mortgage J ).
Before you call your loan originator, try to start thinking of what your ideal monthly payment is for your family’s budget. This is a good starting point so that your loan originator can help give you the range that you will be most comfortable with. This is also something that you should do before looking at houses. It helps keep in perspective the houses that you are comfortable with.