Financing in 08873>Question Details

Allison, Other/Just Looking in 08873

Does the amount of the down payment affect the mortgage rate?

Asked by Allison, 08873 Fri May 1, 2009

In other words, if you have great credit and put down 10%, will your mortgage rate be higher than if you put down 20%?

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The interest rate may not be higher for 10% vs 20% down, but you will have substantial monthly mortgage insurance with 10% down. Also, conventional loans are getting extremely difficult to do these days unless you have 20% down. The mortgage insurance companies are in bad financial shape so they are being super conservative. So this is why most people with less than 20% are going with FHA loans. FHA loans have similar interest rates to 20% down conventional loans, but FHA loans carry a lot of mortgage insurance. You have 1.75% up front MI that can be paid or rolled into the loan balance and .055 per month MI.
0 votes Thank Flag Link Sat May 2, 2009
The answer is a "yes" in most cases a higher down payment will result in lower rates.
Also, if you are trying to decide between 10 and 20 percent down, factor in Mortgage Insurance (PMI), which will add the equivalent of a half percent or more to the rate -- so, you may get a double hit -- first with possibly a higher interest rate for the rate itself, plus an additional PMI charge.
The situation gets uglier if it is a condo/townhouse. New Fannie Mae guidelines have reslted in lenders charging significantly more in terms of rates or points if you are putting less than 25 percent down on a condo.
The good news is if you are fortunate enough to have 30 or 40 percent down (or equity in your home, in the case of a refinance, of , say, 60 percent or so)you will get a really big break on rates.
Plus, the fact is we are in a historically low period for interest rates, so even if some buyers do get a higher rate with a smaller down payment, it's still a MUCH LOWER rate than they would have gotten a year ago.
If you would like to get a more exact figure based on the type of property you are buying, feel free to email me with the kind of property (condo, single family home, two family etc), the approximate size of the loan and I can narrow down the situation for you.
Ruth Bonapace
mortgage lender
ruthbonapace@gmail.com
201 741 5269
0 votes Thank Flag Link Sat May 2, 2009
It could...it all depends on the loan products available when you are ready to buy. Your best bet is to talk to a mortgage broker, find out the options available, and select the loan that best meets your needs. Also talk to your local bank....compare loans and select wisely!
Web Reference: http://cindihagley.com
0 votes Thank Flag Link Fri May 1, 2009
Cindi Hagley,…, Real Estate Pro in San Ramon, CA
MVP'08
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