Interest rates are being held artificially low - the idea is that low interest rates spur investment and ignite growth.
So putting extra money into a downpayment has an opportunity cost - you're putting money in to avoid borrowing it at below-market rates, when you can take that money and invest it elsewhere - or simply provide extra liquidity - for a really minimal cost.
There are some financial advisers who think that even with the cost of mortgage insurance, putting the minimum down is the way to go. And there's something to that - people who put 20% down a few years ago lost their equity; people who put the minimum down were just under water.
All the best,
First, most homes in this area are now sold in a multiple offer situation. Your offer will be compared to cash deals, conventional loans (with downpayments of more than 20%) and FHA loans. Cash wins a lot of the time. Conventional loans would be considered a second best option.
Of course, this is based on the average home purchase of about $200,000. If you're looking to buy something a lot more expensive, it probably doesn't matter, because the competition happens at the economical part of the market.
Also, a conventional mortgage means that you won't have to pay for mortgage insurance, and your monthly payments may be lower.
Accrued interest does the opposite of amortization and if you compare the two you will be surprised at what you discover, try it.
Also, money locked in equity is harder to get out in case of an emergency or tragedy, when you need liquidity the most is when a lender canâ€™t help, one of lifeâ€™s ironies.
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If there is a competing offer to yours, and all things are otherwise equal, then more cash in the deal may well tilt the deal. For one thing, very little cash - or inflating the price to allow you to finance a portion of closing costs - can strain the appraisal. Underappraisals are getting in the way of some deals in my area at the moment. I''m battling one right now----
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This question is more dependent on what you qualify for.
Susan Penn, PA, SFR, CDPE
EWM RealtorsÂ® | A HomeServices of America Company | An Affiliate of Berkshire Hathaway
2000 Main Street, Suite 103 | Weston, FL 33326
T: 954.306.7337 | C: 954.557.5993 | F: 954.515.0200 | email@example.com | http://www.ewm.com
Your agent will help you with this strategy. Before any of this is relevant, you need to get the property under contract. Again, your agent is your guide. Yes, the down payment does make a difference but not for the reasons you may think. Seriously, chat with your agent so you are clear regarding the strategy to be put into play and what is most beneficial for you in regards to your financial situation and purchase objectives.
Best of success in buying your Miramar home,
Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL
Questions? Chat on: http://www.FloridaRealEstateMadeEASY.com
Charles Rutenberg Realty