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the most encompassing guidelines or umbrella under which the largest segment of homebuyers can fit self employed, stated income, etc., included. The widest cast net, if you will. And, the mortgage insurance requirement will still apply.

If you can come up with a 10% down payment, you can probably avoid mortgage insurance by financing another 10% of the purchase price with a subordinate, second loan. Lenders refer to it as an 80-10-10 loan. That means a base loan amount of 80% of value, a second loan of 10% of value and the remaining 10% down payment comes out of your pocket. If your income is above a certain level, this route is attractive because it allows the consumer the benefit of writing off interest on the second loan since they can't write off mortgage insurance. You can also come up with more than 10% down payment and obtain the appropriate secondary financing to hit that 80% threshold that avoids mortgage insurance.

Why wouldn't you always put all of your savings toward a home? Because your money may be spent or invested elsewhere and serve you better. For instance, if you qualify for a first time homebuyer program and have $1000 that you had tucked away for a down payment, you could finance the entire purchase price of the loan at a 6% interest rate, your realtor can negotiate with the seller to pay a portion of the closing costs and in turn, you could eliminate that nasty credit card debt that you are paying 13.9% interest on. Make sense?

Of course, your mortgage lender should be able to assist you in examining and choosing which down payment is best or perhaps, necessary for you. Be forthcoming about your goals and needs, and the down payment question should be easily answered.

Learn more about this author, Kristin Abouelata.
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