In most cases, you’ll need money for a down payment on a mortgage, although with some mortgage products, you do not need a down payment. You’ll also need closing costs on a mortgage and other housing-related costs, such as moving expenses, maintenance, and repair costs.
Down Payments
The down payment is a percentage of the value of the property. The percentage will b determined by the type of mortgage you select. Down payments usually range from 0 to 20% of the property value.
You may be required to have private mortgage insurance, called PMI, or a government mortgage insurance, called GMI, if your down payment is less than 20%. Private mortgage insurance helps protect lenders from losses in the event that a homeowner defaults on the mortgage and loses the home to foreclosure.
Closing Costs
Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed, and other settlement costs. These costs generally range between 2 and 7% of the mortgage amount. You will receive an estimate of these costs from your lender after you apply for a mortgage. Some mortgage programs provide assistance with closing costs. Discuss this option with your lender.
At the beginning of the loan and, again, at the beginning of every year, the lender estimates how much the taxes and insurance will cost for the year and divides the cost by 12. The lender collects the money on a monthly basis and saves it in a special account called an escrow account. When the bills are due, the lender pays them on your behalf. This is a convenience for the borrower and also protects the lender in case the borrower does not have money or just forgets to pay these expenses.
Down Payments
The down payment is a percentage of the value of the property. The percentage will b determined by the type of mortgage you select. Down payments usually range from 0 to 20% of the property value.
You may be required to have private mortgage insurance, called PMI, or a government mortgage insurance, called GMI, if your down payment is less than 20%. Private mortgage insurance helps protect lenders from losses in the event that a homeowner defaults on the mortgage and loses the home to foreclosure.
Closing Costs
Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed, and other settlement costs. These costs generally range between 2 and 7% of the mortgage amount. You will receive an estimate of these costs from your lender after you apply for a mortgage. Some mortgage programs provide assistance with closing costs. Discuss this option with your lender.
At the beginning of the loan and, again, at the beginning of every year, the lender estimates how much the taxes and insurance will cost for the year and divides the cost by 12. The lender collects the money on a monthly basis and saves it in a special account called an escrow account. When the bills are due, the lender pays them on your behalf. This is a convenience for the borrower and also protects the lender in case the borrower does not have money or just forgets to pay these expenses.
A point is 1% of the amount of the mortgage loan. For example, if a loan is made for $50,000,
1 point = $500.
Title insurance is insurance that protects lenders and homeowners against loss of their interest in the property because of legal problems with the title.
Other Housing-Related Costs
Whether you need to hire a moving company or not, moving costs money. In addition to the down payment, escrow accounts, and closing costs, you will have to save enough money to pay for move-in expenses, including:
- Van rental or moving company fee
- Changing the locks on doors, installing window bolts, and smoke detectors
- Deposits and start-up fees for utilities, phone, cable, trash removal, and other services
- Immediate repairs or work your home may need, such as cleaning and painting
- New appliances, if necessary
- Equipment such as lawnmowers and hoses, if needed
- Decorating and furniture, if needed
