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Cliff Hayden
    Years of Experience: 5


Direct: (801) 645-4017

Office: 801-479-9300

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Coldwell Banker
2225 Washington Blvd. #100
Ogden, Utah

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Down Payment and Closing Costs

Many first time buyers and even some second time buyers are unsure of how to figure their down payment and closing costs. Not having an understanding of the down payment and closing cost can create a hesitant and unsure attitude as they look at properties – keeping them from making a good decision when they find the right property.

Down Payments

A down payment for a home is usually between 3½% and 20% of the total cost of the home. The amount of the required down payment depends on your credit history, income, the cost of the home, and the type of mortgage you choose. Many first-time homebuyers put down between 3½% to 5% of the cost of the home.

Saving for a down payment is the first step toward homeownership and it helps you prepare for the financial obligations that come with owning a home.  If you do not have enough savings for a down payment, you may want to postpone house hunting to give yourself an opportunity to save for a down payment rather than looking at a low down payment mortgage.

Keep in mind, when you apply for a home loan, in addition to your down payment, you should have at least three months worth of mortgage payments saved, or what lenders call cash reserves.

Most lenders want to know the source of your down payment and have restrictions about how much can come from gifts from a relative. Ask your lender for more information.

Closing Costs

Closing, or settlement, costs are fees you pay when you actually get your loan from your financial institution. These include costs will include your points, taxes, title insurance, financing costs, items that must be prepaid or escrowed, and other settlement costs. You should negotiate for lower fees the same way that you should negotiate for the best rate. Some fees, such as taxes, may be fixed but, your lender may be willing to negotiate others.

Closing costs generally range between 2% to 7% of the property value. You’ll receive an estimate from your lender after you apply for a mortgage. You must pay these costs before you move into your new home.

PMI Insurance

Generally, if your down payment is less than 20% of the price of the home, you will be required to purchase Private Mortgage Insurance (called PMI or sometimes MI). This protects the lender if you should be unable to pay off the loan.

Federal law requires PMI to be cancelled under certain circumstances; for example, when you have paid off a certain percentage of your mortgage or your home’s property value has increased to a certain percentage above the value of the mortgage.

Contact your lender for specific information about the status of your private mortgage insurance.

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