In today's market, home buyers and sellers are having trouble with houses appraising out to the purchase price, resulting in transactions falling apart. With a higher down payment, one can literally push the appraisal over the top and breeze through it.
However, in an economically unstable time, sometimes it is more prudent to remain liquid and opt for a smaller down payment retaining your cash money for a rainy day.
Talk with a qualified lender and discuss the many different options as well as your needs and concerns. Best of luck.
I work a lot with first time home buyers and $20K sounds like a lot of money, and it is. However, the difference $20K makes on a 30 year loan at 5% interest is not very much. SOME clients & investors will shoot for 20% down. Some because they can only get a loan with 20% but others will put that much down because it does lower the rate BUT more importantly, it gets you out of PMI or mortgage owners insurance, which in turn, reduces your monthtly payment.
Go see a local lender, it is free to do and you will learn a lot.
Tierra Antigua Realty
Example.. If you throw down an extra $1000, it may only reduce your payment between $6 and $10 per month. Usually the rule of thumb on this one is to simply think in terms of.. "For every $1000 I put down, it will make my payment about $6 to $10 less per month" Obviously a lot of things are involved in getting a better figure.. What is your interest rate? How big is the loan? Will there be Mortgage Insurance or PMI? Etc. If you put more down will you eliminate the PMI or the MI?
Here's another way to think about it.. if you have extra money to put down... find out how much more you would need to put down to keep the payment to where you would like it to be, and reduce the term of the note... Example: Your payment on a 30 year note $1000 per month with 3.5% down... Maybe ask "How much more would I have to put down to keep my payment at $1000 per month and have my note only be 15 years" Most folks don't think about that... but you just cut your mortgage length in half and saved yourself roughly the sales price of the home in interest you will never pay..... That is a SMART way to use extra down payment. Maybe find out how much more down to get a 10 year note... Have that sucker paid off in full... Imagine life with NO MORTGAGE PAYMENT!! Wouldn't that be nice!! You will build equity so much faster, and your extra down payment actually went to work for you!
Depending on what your goals are... sometimes it may be better to keep the extra cash in your bank account and use that money to pay off other debts that have higher interest rates... If you have no other debts.. it's not a bad place to put money.. It's like putting it into a savings account you cant touch... but when you sell the home.. you will get it back and then some (hopefully.)
But... if you are like me.. I just hate montly payments of any kind... So I would focus all of my extra money into paying off the note as fast as possible.. So, I might put less money down... and then start smashing principal balance and keep the higher payment to pay it off faster... But, then I hate debt so much.. that I am crazy like that.
Just and Idea :)
Realtor / Mortgage Loan Officer
Keller Williams Realty
It's certainly called leverage. OPM is a great thing if used appropriately. Depends on what other plans you may have for the rest of your liquid reserves, but i certainly would never recommend putting more than 20% on your primary residence unless you have a very particular circumstance.
A good lender can give you specific numbers based on your unique personal situation - and it costs you nothing for the information.
Contact Cyrena Durkee @ WR Starkey Mortgage and she'll answer all your mortgage questions. Email - email@example.com, cell - 210-685-5618 and website - http://www.LoansByCyrena.com (you can even apply online).
REALTOR ~ Smallwood & Associates
Keller Williams Legacy
Putting down more than 20% can have diminishing returns while interest rates are so low. You may be better served putting your money to work for you in safe investments or as a nest egg for future needs. That is more of a personal decision you may want to give some thought to.
On mortgage alone...each $1000 extra you put down saves about $6/month at 6% interest on a 30year loan.
Search mortgage calculator on google and you can play around with different senarios to find the best for you.
Good Sunday! Excellent question. If you are putting down 50k then your payment will be reduced by $350/month. You might be better served investing this money in another investment, unless you simply want to be guaranteed a lower payment over time. Also, the more you put down could also reduce your interest rate, but confer with your lender to make sure. In either case you should sit down with a lender and or an accountant and see which is the best use of your funds.
Let me know if you have any questions, as you are my ideal client, one who is savvy and knows what you are looking for in a home. I pay my buyer clients for that ability.
Keep in mind that we are a non-traditional type of real estate company with the best buyer rebate program in town.
P.S. I love referrals! If you ever have a friend of family member, who is tech savvy looking to find a home in the 225k-800k range, and would appreciate a New Way of Buying a Home in Texas, please refer them to http://www.Buy75.com
BuyersHouseRealty is the virtual evolution of real estate, and we firmly believe in educating buyers! So much that we pay our buyers for their education! Learn more>> http://www.buy75.com/learn-and-earn/why-choose-buy75
Happy House Hunting,
"The Real Estate Deal"
Definitely speak to a lender but one that will give you the important information you need to make a wise purchasing decision. Ask the lender to provide you with purchasing worksheets that will give you a breakdown of everything. For example, if you want to purchase a house at $200,000k with an 80% loan, 20% down with an interest rate of 4.5%, the worksheet will give you a break down of the following including: closing cost, taxes, insurance, and most importantly, monthly payment.
Several of these scenarios can provide you with good information to help you make a wise purchasing choice. Don't be afraid to ask questions because the industry has changed so much you need to know the facts.
David Marne, Broker
Half Priced Real Estate
At today's low interest rates, for every $1000 you put down on a home your payment is reduced by approximately $5/month on a 30 year fixed rate mortgage. However, once your down payment amount is at least 20% of the total sales price, then your payment could be reduced even furthur by the amount of any mortgage insurance premium which is required with many loans. If you are buying with a VA loan or certain USDA loans, then mortgage insurance is not required.
Please let me know if you have any further questions, or would like assistance with your home purchase! I would be glad to help and I am an Accredited Buyer Representative!
Amanda P. Herring
Where you save would be that you are borrowing less thus paying less on interest over the life of the loan.
Apply. Have the lender show you your pmt with and without the large down pmt.
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors