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Finance: Down Payments, Insurance, & Closing Costs
When you buy a home, there are several up-front costs you should be aware of, particularly down payments and closing costs. The costs can be substantial, and should be considered as you save towards the purchase of a home.
Down Payment
Depending on your credit history, income, the cost of the home, and the type of mortgage you choose, your down payment could be between 3% and 20% of the total cost of the home. A few lenders offer creative financing that allow for no down payment at all.
Mortgage Insurance
If you're down payment is less than 20%, you will need to purchase private mortgage insurance (PMI). The PMI is added to your closing and monthly mortgage costs.
Closing Costs
Closing costs are paid at the time you close your loan, and usually range between 2-7% of the total loan value. Closing costs include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed, and other settlement costs. You must pay these costs at the time you close on your loan.