Your down payment plays an important role in the type of house you can buy and the loan you can get. The larger the down payment, the better chances you have of getting a lower interest rate, and the better chances you have of getting approved for a loan to begin with. Generally, a larger down payment will lead a lender to possibly look past bad credit and proof of income sources.

How Do I Know if my Down Payment is too Small?

If you are putting down an amount that is less than 20% of the purchase price of the home, it is probably too small. If this is the case, you should look into purchasing private mortgage insurance which will protect the lender.

Are There any Other Alternatives to People Who Don't Have Enough for a Reasonable Down Payment?

There are several alternatives available to people who lack the necessary amount for a reasonable down payment:

  • Federal Housing Administration Mortgages - Easier credit qualification and, if approved, requires additional insurance payments provided to lenders
  • State and Local Government Backed Mortgages - Directed towards first-time buyers providing low down payment requirements with subsidized interest rates
  • Department of Veteran Affairs Mortgages - Specifically for veterans requiring no down payment
  • Rural Housing Service Mortgages - For farmers and similar borrowers requiring no down payment with low interest rates

Is the Down Payment the Only Upfront Cost I Should be Concerned With?

If only it were that easy. There are potentially dozens of other costs, considered closing costs, to be paid out prior to the completed sale. Closing costs are based on closing practices which vary from state to state and possibly between counties as well. Examples of such fees include appraisal fees, recording fees, transfer taxes, and survey costs.

Should I Consult a Lawyer about my Down Payment Issues?

Buying and financing a piece of real estate can be one of the most important experiences in your life. A bankruptcy attorney can advise you of the different mortgage financing options for this financial endeavor. An attorney can also review any financial documents, and advise you about your obligations and the best way to proceed.