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Can a Personal Loan be used When Buying a Home?
Most time people look at buying a home in a very plain and simple way. You can absolutely buy a home with a personal loan as your down payment as long as it fits into your borrowing power. The bank will figure out how much you can spend per month and translate it into an amount of home for you so that you don't have to calculate anything on your own.
If you're buying a home for the first time you'll need about 3-5% for a down payment and about $2,000 for every $100,000 for closing costs. Usually the bank or mortgage lender will say "you can afford $150,000" rather than "you can afford $1,200 per month". Ask them for the monthly amount you can afford so that you can add up the personal loan along with the mortgage payment and taxes to equal less than your monthly borrowing power. The reason for this is because you could find homes with different amounts for monthly taxes which change the amount of home you can afford.
First figure out what the personal loan will cost you per month and subtract it from the monthly amount you can afford. Then look at a few home prices and monthly taxes to see the rough amount you can afford including your down payment. If you find a home with lower taxes than you anticipated then you can afford that much more per month on your mortgage payment.
Use the mortgage calculator to help you play with the mortgage payment and personal loan monthly payment. Then search around for the best possible interest rate which will not only save you money per month but, again, it will allow you to afford more which could be used towards the amount of home instead.
If you currently have a car paid off then you can get a loan with the car as collateral. That will give you a 4-5% interest rate rather than a 13% interest rate on the personal loan you're trying to get. If you're buying a second home then you could also get a home equity loan on your first home for the down payment on your second.
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