When buying property you must have at least 10 percent of down payment to buy the property.
In addition to saving money on interest, you can avoid the added cost of private mortgage insurance by putting down this much.
Many people don’t have the equivalent of 10 percent or more of the purchase price of a homw to avoid paying private mortgage insurance. Here are a number of solutions for coming up with that 20 percent faster or buying with less money down :-
1. Go on a spending diet
– One sure way to come up with a down payment is to raise your savings rate by slashing your spending.
2. Consider lower-priced properties
– Some first time home buyers have expectations that are too grand. Smaller properties and ones that need some work can help keep down the purchase price and, therefore the required down payment.
3. Find partners
– You can often get more home for your money when you buy a building in partnership with one, two or a few people. Make sure you write up a legal contract to specify what’s going to happen if a partner wants out, divorces or passes away.
4. Seek reduced down-payment financing
– Some lenders will offer you a mortgage even though you may be able to put down only 10 percent of the purchase price (typically at the cost of a much higher interest rate).
You must have solid credit to qualify for such loans, and you generally have to obtain and pay for the extra expense of private mortgage insurance (PMI), which protects the lender if you default on the loan. When the property value rises enough or you pay down the mortgage enough to have 20-percent equity in the property, you can drop the PMI.
You have to apply to your lender to have the PMI dropped; it doesn’t happen automatically.
Some property owners or developers may also be willing to finance your purchase with 10 percent down. You can’t be as picky about properties because not as many are available under these terms.
5. Get assistance from family
– If your parents, grandparents or other relatives have money dozing away in a savings or CD account, they may be willing to lend (or even give) you the down payment. You can pay them an interest rate higher than the rate they’re currently earning but lower than what you’d pay to borrow from a bank. Lenders generally ask whether any portion of the down payment is borrowed and will reduce the maximum amount they’re willing to loan you accordingly.
Source :- Personal Finance For Dummies
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