Many people who apply for a mortgage want to borrow enough money to cover the purchase price of the home they’re buying (minus the down payment they’re able to come up with). But what if the home you’re buying will need improvements? If that’s the case, you may be tempted to take out a higher mortgage.
Here’s how that might work. Say your home costs $200,000. You have $50,000 available for a down payment. So you plan to only borrow $150,000. However, that’s a larger down payment than your lender will ask for. Most lenders are more than satisfied with a 20% down payment. For this example, a 20% down payment would only be $40,000. In this case, you could simply put down less money ($40,000 instead of $50,000), get a larger mortgage ($160,000 instead of $150,000), and use the remaining funds (the extra $10,000 you