One of the scariest thoughts to rush through the head of a buyer in the market for a new home is the famous down payment that comes associated with every mortgage loan. A good number of buyers will even state that without a down payment it is impossible to purchase a home, no need in even trying, because the answer will be a unenthusiastic one.

Potential buyers get apprehensive just by thinking about the matter, especially because no down payment, means no loan which in return implies no home will be bought. Although there is some level of truth contained in the last statement, most financial institutions have alternatives especially crafted for clients unable to make a 20 percent down payment when purchasing their dream home. So is it really important to make a down payment when buying a home?

In simple terms no, although things are a little more complex than what may initially meet the eye. Lenders require borrowers to make a sizable 20 percent down payment when taking out a home loan for security reasons. The good news is that currently it is common to have borrowers put down as little as 5 percent on a home loan although this solution generally requires buyers to take out private mortgage insurance. Another possible alternative would be what is known as a zero-down or no money down home loan. This solution assures the lender will finance the total amount required to purchase the home whilst the borrower will not be required to crop up any sort down payment.

Buyers interested in investing only a small percentage on a down payment or no down payment at all, will face some disadvantages. The most notable has to be the mandatory private mortgage insurance which could be extremely expensive and in many ways, offer little advantages over making a down payment. The good news is that by law lenders are required to cancel private mortgage insurance when the borrower reaches 22 percent of equity in their home.

In the end of the day, buyers able to contribute 20 percent towards their home should do so since the advantages behind this practice are extremely beneficial. Mainly, buyers will pay less each month and have some equity on their home from day one. On the other hand, putting down as little as possible, allows buyers to invest the money saved on other more profitable ventures.

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