Buying a home is an exciting and stressful process. You want the perfect home for your family, but you want to make sure that you won't be saddled with an unaffordable monthly payment. The good news is that if you have saved up $100,000 for a down payment, you are in a good position to get a mortgage with very favorable terms so that you can afford your dream house.
Your Home-Buying Budget
One of the first home-buying tasks is figuring out how much mortgage you can afford so that you can target houses within your budget. Your budget depends on three things: the size of your down payment, how much a mortgage lender is willing to let you borrow and your credit score. In general, the higher your down payment, the stronger your buying power because you have already saved up a significant amount toward the total cost of your new home
No matter how big your down payment is, how much house you can afford will depend on your annual income, your credit score and your debts. A $100,000 down payment puts you in a good position to afford a significant amount of house in most parts of the country, but if you have a poor credit score, your bank may lend you less money than someone with a great credit score and a $100,000 down payment. To calculate what kind of home you might be able to afford with a $100,000 down payment, you can use a mortgage calculator. A mortgage calculator will tell you exactly how much house you can afford in your area, depending on your financial circumstances.
Conventional Loan Requirements
Once you know how much house you can afford, you will have to choose a loan. Conventional financing from a bank or other mortgage-lending institution requires between 5 and 20 percent down. A down payment of less than 20 percent means you'll most likely have to pay private mortgage insurance, known as PMI. This protects the lender if you default. If you are putting down $100,000, however, you will likely be putting more than 20 percent down, and you will generally not need PMI for such a large down payment. Each lender will have its own requirements and benefits, and putting down $100,000 may help you secure favorable loan conditions.
Down Payment Considerations
Some loans require a higher down payment than 20 percent due to the risk involved for the lender. Your credit profile, market conditions and the property you wish to buy may impact your loan's risk level. For example, buying an investment property or having a recent foreclosure or bankruptcy on your credit record may require more than 20 percent down. Likewise, a lower credit score may mean you're not able to get a particularly large mortgage.
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