Advances (or down payment , also called deposits in English English), are payments used in the context of purchasing expensive items such as cars and homes, where payments are an early part of the total amount due and are usually provided in cash upon completion of the transaction. Loans or amount of cash are then required to make full payment.
The main purpose of advance payment is to ensure that lending institutions have sufficient capital to create money for loans in the fractional reserve banking system and to recover a portion of the balance due on the loan if the borrower fails. In real estate, assets are used as collateral to secure loans against default. If the borrower fails to pay the loan, the lender is legally entitled to sell the asset and retain a portion of the amount sufficient to cover the remaining balance of the loan, including any fees and interest added. The down payment in this case reduces the lender's risk to be less than the value of the collateral, so it is more likely that the lender will recover the full amount in the event of a failure.
The size of the advance payment determines the extent to which the lender is protected against any factors that may reduce the value of the collateral, as well as the loss of profit between the last payment time and the final sale of the collateral.
Furthermore, making advance payments indicates that the borrower can collect some money for long-term investments, which the lender may want as evidence that the borrower's finances are healthy, and that the borrower does not borrow outside his debt. way.
If the borrower can not pay off the loan as a whole, he lost the amount of the down payment.
Video Down payment
Amount
In the United States, downward payments for home purchases usually vary between 3.5% and 20% of the purchase price. The Federal Housing Administration, or FHA has advocated lower payments since its establishment in 1934, and currently, eligible borrowers for FHA loans pay only 3.5% for the down payment. With the increase in house prices in the years from 2000 to 2007, lenders are willing to accept a smaller or non-existent down payment (either through 100% Financing, payment assistance assisted by the seller, the provider of payment under the government, or by provides a combination of 80% 1 and 20% second mortgage), so more individuals can buy a home as their primary residence. Currently, in the United States, VA or the Department of Veterans Affairs, offers 100% financing for qualified veterans. The USDA Home Loan Program also offers a 100% mortgage loan with no down payment. These loans are available as direct or guaranteed loans and are offered to eligible borrowers to buy homes in more rural areas. Most of the State Finance Finance Institutions offer advance assistance. In 2013, Agencies offers programs that provide assistance to eligible home buyers of up to 3% of the loan amount. The money from the State Housing Agency can be used for down payment or closing costs.
There are more risks for lenders when an individual buys a home as an investment property. Therefore, the lender may impose a higher interest rate and expect a higher down payment.
Maps Down payment
See also
- Foreclosure
References
Source of the article : Wikipedia
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