Determining how much money you have available for down payment and closing costs affects almost every aspect of buying a home.

Mortgage Programs

The greater your down payment, the greater your mortgage program options. If you only have enough for a minimum down payment, your choices of loan program will be limited. If you are receiving a gift for all or part of the down payment, or need the lender or seller to cover any part of your closing costs, this further limits your options.

If you borrow all or a portion of the down payment from your 401K or retirement plan, different loan programs have different rules on how you qualify.

Shopping Rates

The interest rates for different loan programs are not the same. Some loan programs charge a slightly higher interest rate for minimal down payments. For example, conventional, VA, and FHA all offer fixed rate loans. However, the rates vary from one program to another.

If you shop lenders by phone, the loan officer will be able to tell which programs fit and quote you rates accordingly.

Writing Your Offer

Your down payment affects how you write your offer to purchase a home. Different loan programs have different rules which also affect how you write your offer. This is especially important when dealing with FHA and VA loans.

If you are asking the seller to pay all or part of your closing costs, you have to be certain your loan program allows what you are asking. For smaller down payments, lenders allow the seller to pay less closing costs than for larger down payments. Some loan programs will allow a seller to pay certain types of costs, but not others.

Finally, your down payment also affects your ability to qualify for a loan. When you make a small down payment, lenders are fairly strict about having you conform to their underwriting guidelines.