Is there an explanation for these mortgage results?

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I just used a mortgage calculator provided online by a real estate firm in the Midwest to come up with the following for three different (theoretical) down payment amounts

Price (In the neighborhood of ) $ 489,000
Down Payment $ 400/4000/40,000
Interest Rate 4%
Mortgage Term 30 years
Payment $ 2, 338 / 2, 320 / 2, 137

This may not be all banks’ takes, and the interest rate may affect things a little, but isn’t mortgage rate suppose to be somewhat uniform across the board in the US? As it stands, there seems precious little monthly advantage to making a larger down payment. Why is that? Why is it that so much is required.

The mortgage calculator at www.mortgage.org (for example) doesn’t even take into account your initial down payment, only the loan amount. Is that an important difference?

2 Comments
  1. Reply
    Christopher B
    April 29, 2011 at 9:17 pm

    The different down payments will result in different monthly payments (although the interest rates did not change to reflect the normal difference you will see in interest rates for .1%, 1%, and 10% down payments.

  2. Reply
    real estate guy
    April 29, 2011 at 9:34 pm

    You are somewhat correct about the downpayment. For every $ 10,000 you put down, the payment is lowered around $ 55 a month.

    2nd, the 30 year rate is 5% now (not 4%) and yes, this will actually effect the payment greatly. Just a 1% increase in rates will increase the monthly payment by $ 8.83 for every $ 10,000 borrowed. So if you borrow $ 400,000, the payment would be 350 more per month. Rates are very important.

    On a 489,000 house, you would need AT LEAST 3.5% for FHA. But this depends on the loan limit in your area. Otherwise, you would need AT LEAST 5% for a regular confirming loan. UNLESS your area is in a declining market as set forth by Freddie Mac, then you would need AT LEAST 10% down.

    Why do they require money down. Simple, more money down, the less risk you are of walking away.

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