Financing in Lewisville>Question Details

Christopher, Home Seller in Lewisville, TX

Should I put 10% down or 20% on 300K home at 4.5% / 4.75% interest rates?

Asked by Christopher, Lewisville, TX Wed May 13, 2009

We have the 20% to put down on our new home. But should we? The home will appraise for $350k, so should we only put 10% down, pay PMI for one year, then have it removed because the equity in the home would be below 80%? Or should we do the traditional 20% down? Our monthly payment varies by $77 with the two options, but *I* think we should put 10% down and keep 30K in the bank. Wife thinks we should put 60k down and not pay PMI, and avoid interest over the long term. But we plan to stay in the home for at least 8 years, possibly more.


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35% down. This will save you 210,000 over the life of the loan. If a long term buy as opposed to 2 or 3 year flip. Every dollar you put down saves you two dollars in cost over a 30 year note.
1 vote Thank Flag Link Wed Dec 8, 2010
Down Payment
The easiest way to know how much down payment to use is simple. How much can you afford to part with ?
also remember, in case of an emergency, you be lite on cash available for an emergency if you use a lot of down payment.
All lenders are different, some want more down payment, others don't want or need as much.
Shop around.
I hope this helps
3 votes Thank Flag Link Sat Jul 13, 2013
One thing you need to be careful with in a new build home is the valuation. Here in Austin people who buy new build homes typically pay $20-$40,000 more than a similar existing home that is a couple years old. When you go to have your home reappraised in a year you may find yourself not where you expected. Of course you could put the extra money down in a year once you have the home reappraised.

Again, I can't talk for other areas of the country but in Austin you almost always pay a large premium to build a new home with a builder. They always try to force you to use their financing because they will make sure the home appraises out. I have many friends who are appraisers and when they do the appraisals for new build homes they have to get comps from the builder because new home sales are not reported in the MLS and the existing sales are not supporting the sales price. All of my appraisers tell me that you overpay for new homes and I have known that myself from personal experience as well. You do get to choose everything you want but you do end up paying for that privilege. If you will be in the home for 8 years you will be OK unless the market is in another down cycle at that time when you are looking to sell.

Just something to think about... don't always assume your home is worth a lot more than what you are paying because if it actually was the builders would definitely be charging more if they could. If you want to check this out have a local Realtor pull comps that are as close to your home as possible and verify that your home is actually worth $50,000 more than you are buying it for... you may be surprised.

Before my clients and I start negotiating with the builder I do a detailed market analysis on the home and the amenities wanted so they will know upfront if they are substantially overpaying for the home they want. I let them know going in that in most cases they will pay more but I do my best to keep the builders honest. I also refund anything over the standard commission back to my clients to help with their closing costs. if you buy a new build home without a Realtor you do not get a better price, the builder just keeps the money so you should find a local Realtor you can trust to look out for your best interests.

Best of luck to you.

Best of luck to you.
1 vote Thank Flag Link Tue Jun 15, 2010
It depends on your loan: For example, 4.75% 30yr fix.

10% of $300k is $30k. If you are not putting in 20% that means you are borrowing 10% more than what you didn't have to borrow. By year 8, you would have paid approximately over $10,000 in interest for that $30,000 loan. So... look at your investment plans to see if keeping the 30k in the bank now would make you more money than to pay the down payment.

Celine Fang
Private Financing Program Specialist
Immi-Nest, LLC
504-723-9269 (C)
206-339-8535 (F)
1 vote Thank Flag Link Sat Jun 12, 2010
Thank you all for your posts. They were very helpful.

This post is now 3 years old.

I know the answers will help other home buyers!! It helped me!
0 votes Thank Flag Link Sat Jul 13, 2013
Hey Tom, you didn't say anything about an 80/10/10 either. hey we can't all think of it all in this here little forum.
0 votes Thank Flag Link Thu May 14, 2009
You can also buy the rate down to 4.5%
Was this option not given?
Buying down rates are a good value right now.
0 votes Thank Flag Link Thu May 14, 2009
One quick opinion on what to put down on a house. If you have any high interest credit cards, car payment etc. use that money to apply against that first. it's better to have a home loan at 4,75% than a credit card or car at 15% plus...If not, it's still good to use that money for emergency or investment rather than sinking it into the house. Just my opinion, your situation may be different.
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0 votes Thank Flag Link Thu May 14, 2009
You should confer with CPA who handles your finances. You might be able to receive additional annual tax incentives, short/ long term goals for overall investments.

$77 x 12 months - $924 then drop PMI could be a great option notify lender 20% equity in home

In many instances families can not predict future based on economy feel more comfortable with $30K in bank saving "rainy day" as referenced in prior blog posts.

You can also work with bi- monthly mortgage payments which reduce your balance on your home for life of mortgage or ownership.

As professional without knowing your entire financial records and back ground difficult make a comment for your best interest.

National Featured Realtor and Consultant, Mortgage Loan Officer, Lecturer regarding Credit Repair
Web Reference:
0 votes Thank Flag Link Thu May 14, 2009
As I mentioned on another post, please take my opinion with a grain of salt because it is my job to sell mortgages. However, I would honestly say that I have seen more people regret putting more down on a home than I have seen people wish that they put more money down. I know that nobody likes the thoguht of mortgage insurance, but let me tell you that you can NOT get your cash back out of the property once you have put it into it. Simply put, you can only get mortgage insurance on purchase loans, not cash-out refis. With the economy being what it is, I tell more and more borrowers to protect their cash, keep your payments reasonable and get a great interest rate. You have much more security in keeping your money in your bank than you do putting it into your home.

It may not sound like the best financial advice but it is also the one most probable to save you any headaches and stress down the road. Good Luck in whatever you choose.

Luke Allison
Bank of America Home Loans
0 votes Thank Flag Link Thu May 14, 2009
If the extra $30,000 can work better for you elsewhere and make more than $77/mo stick with 10% down, otherwise if you don't need the extra $30K in your bank as a rainy-day fund apply it to your home as it's probably one of the best investments you can make in this day and in our North Texas market. Congratulations on your new home!

Mike Gonzalez, REALTOR®
Listing Specialist / Buyer Representative
The Rivera Team at Keller Williams Dallas Northwest
Direct: (214) 783-4240 | |
0 votes Thank Flag Link Thu May 14, 2009
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