Home Loan, Down Payment & EMIs: Facts & Myth

Are you in the real estate market and ready to buy a home? Are you planning to take a home loan for your next big purchase? No doubt you have heard about many things including how home loans work, why the credit score is important, and why you should make a down payment first. You may have heard that unless you have enough money for down payment, you should not buy a house. The popular figure is 20% of the total price of the property. Putting 20% for a house is easy for many but before you accept all the myths, you must know pros and cons of taking any such decision. It is better you separate the facts and myths.


The 20% rule is really good. It lets you own a house by making a small payment, but the catch here is, the less you pay for the down payment, the more you will have to pay every month. Putting more money as a part of the down payment means you owe less and your monthly mortgage payment will be lower.


If you are not thinking about 20% and in fact trying to find a solution through which you can save that 20% also during the initial stage, you must reconsider your decision. If you are not willing to make the down payment, it will be impossible for you to find a house. No matter how many people you meet or how many properties you visit, the problem will remain the same. You won’t be able to buy, and it’s sad but true.


It’s a simple number game. All you need to do is to pay more at the time of down payment so that you won’t have to pay more interest. Your down payment must come from your own savings. But if you are not sure about your savings and can’t make the 20% down payment, it doesn’t necessarily mean that you don’t qualify for homeownership.


You don’t need to have money in your savings account to buy a house. The down payment can come from many sources. The sources can be a gift, personal funds, grants and a second mortgage as well. If you are found well qualified for homeownership, you can, in fact, utilize any of the sources to complete your down payment process for the house.


Carefully evaluate your financial condition and get a clear idea about how much you can afford. Affordability is the key to homeownership. There’s no point in wasting days, weeks or months in house hunt unless you are realistic about finances. Talk to a lender and if possible, shop for home loans and check the offerings from different institutions.

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