The amount you pay for a down payment, or the upfront sum you pay for a mortgage, varies from mortgage to mortgage. For instance, borrowers seeking a conventional loan will need to make a 20% down payment in order to avoid paying private mortgage insurance (PMI).
Government-backed loans often offer lower down payment requirements ranging from 3% to 5% down. Federal Housing Administration (FHA) mortgages feature down payment requirements as low as 3.5% down while United States Department of Agriculture (USDA) and United States Department of Veterans Affairs (VA) loans require no down payment for qualified borrowers.
Private mortgage insurance (PMI) is an additional fee borrowers pay when they make a down payment below 20% on a conventional mortgage which protects the lender should the borrower default on their loan. Some lenders may give borrowers the opportunity to drop their PMI policy when they have built 20% equity in the home.
The documents most borrowers need to provide to get a mortgage include:
- Two most recent years’ tax returns/W-2s
- Two most recent paystubs and proof of any additional income
- Two months’ bank statements on all accounts
- Driver’s license copy
- Homeowner’s insurance information
- Homeowners association dues or fees statement
If you are a self-employed borrower, refinancing your mortgage, or purchasing an investment property, you may need to provide additional documentation. Always talk to a mortgage expert to understand the exact documents you will need to provide to get a mortgage.
The main types of mortgages available include conventional mortgage, fixed-rate mortgages, adjustable-rate mortgages (ARMs), government loans (FHA, USDA, VA) and jumbo loans. PrimeLending offers more than 400 mortgage and loan programs that include purchase, renovation, construction and refinance mortgages.
How much you can afford to borrow depends on your down payment, gross annual income, monthly debts, mortgage rate, loan term, and debt-to-income ratio (DTI). You can use my free home affordability calculator to get an idea of how much you can afford to borrow.
The interest rate on a mortgage is the percentage of interest (or cost of borrowing the money) a borrower is charged for a home loan. While mortgage interest rates fluctuate based on market conditions, a borrower’s interest rate is determined by their lender and the interest rate they receive will depend on their unique financial circumstances.
