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Mortgage Basics  Chapter 3: Your mortgage payment
Your monthly principal and interest charges are determined by the rate and the amount of the loan.
Your mortgage payment

Down payment
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15-year mortgage
Interest rate Monthly payment Price with
5% down
Price with 10% down Price with 15% down Price with 20% down

You may now want to turn to the calculator "How much house can you afford?" to calculate your down payment. If you are selling a home, you can apply the equity as a down payment on the new house. Note: You need to include an estimate of closing costs in buying the property (plus selling costs if you're also selling a house). Closing costs are generally 3 percent to 5 percent of the sale price.

Now that you've calculated what your down payment will be, here are some tips to help you meet your goal:

  • Have your down payment ready at least 60 days before you apply for a mortgage loan.
  • Start saving now and forgo other expensive cash buys, such as a new car or vacation trip.
  • Borrow your shortfall from the equity in your 401(k) retirement plan. You will be charged prime rate with possibly a small margin added on, but you'll meet your down payment goal and you can repay your retirement fund through your payroll deduction plan.
  • Borrow from family or relatives and pay them back monthly. Lenders may require you and your family lender to sign a "gift letter" indicating that both parties consider this a gift before they will factor the amount into the loan.

If you still come up short on the down payment, don't despair. There are special mortgages and first-time home buyer programs to help you buy your dream home.

-- Posted: May 1, 2006
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