Posted by Andrea Booth on Nov 21, 2016
Lettie Trespasz, a WBG Board Member, has been working in the mortgage industry since 2012. She currently works for Monument Mortgage Co. and is licensed in both MA and NH. Her gift in working with clients is her ability to explain the mortgage process in simple terms. New and transitional buyers who need a patient educator will find one in Lettie. (This article is the third in a series of three.)

Three Keys to Residential Financing: Part 3 – Down Payment and Costs

by Lettie Trespasz, Loan Officer: Monument Mortgage Co.


Down Payment, Closing Costs and Non-Closing Costs, Reserves/Assets

These are assets required to buy your house/condo. It’s important to understand what they mean and how they may affect your monthly costs.


I. Down Payment – There are no absolutes and it changes with loan size, program and product as well as FICO score.

There is no cap on down payment.

There are minimum loan amounts.

  • Loan amount <$417,000 most programs require a 3% of purchase price minimum investment by the Borrower as a minimum down payment.
  • Loan amount >$417,001 most programs require a 5% down payment of which 3% is investment by the Borrower.
  • Gifts are an acceptable form of down payment as long as they are documented and the donor is willing to sign a gift letter. Keep copies of all deposits and from whom for evidencing and documenting.


II. Closing Costs – those costs associated with the purchase of a residence with regard to financing: lender representative, third party fees to assess value and clear title, fees associated with investigating the Borrower and fees to the government.

Not limited to:

Lender Fee, Appraisal, Credit, Tax Service, Flood Certification, Lender Title Insurance, Settlement Fee, Government Recording Fees, Points, Up Front Mortgage Insurance Premium (FHA loans only).


III. Pre-Paid Fees – fees that are associated with owning the property.

Pre-paid interest for the month you close in, real estate taxes that are due prior to closing and the next monthly mortgage payment, and escrow reserves that the lender will hold in case of future increases in real estate taxes or home owner insurance.


IV. Non-Closing Costs (The Uh-Oh! Costs) – those costs associated with owning a home but have little or nothing to do with financing or purchasing but are required or highly recommended purchases.

  • Homeowner’s Insurance – one year policy paid prior to closing. Escrow payments with your monthly payment will then collect the next annual policy premium.
  • Homestead – prep and recording fee that protects your home from personal law suits.
  • Owner’s Title Insurance – protects the buyer from claims against the property by neighbors or previous owners that were not revealed during the title search. Examples may be: former burial ground or disputed boundary line.


V. Reserves and Assets – after everything is done, you will need to have some money left over. How much depends on the property, product and program.