Home Buying in Philadelphia>Question Details

Ronnie, Home Buyer in Philadelphia, PA

Buying a House with Little Down

Asked by Ronnie, Philadelphia, PA Tue May 6, 2008

What I don't understand about putting little down on a house is how that helps your monthly mortgage payments? I understand that it's good for the buyer who doesn't have much saved, but won't doing this simply increase the amount you must pay each month, assuming you have an average interest rate? How can this ultimately be a good thing?

Help the community by answering this question:


Putting little down does cost you more on interest and mortgage insurance. In many cases, it is difficult for most people to save the money to put down, and in other cases people just want to keep their money in reserve or invested in other things.
In answer to your question, it could be a good thing if you can't afford the down payment. I have seen people buy homes and they go up in value and it gives you equity in your home with very little extra money out of pocket.
Good luck,

Michael D Delp
Mortgage Pro
4802 Old Bethlehem Pike,
Telford Pa. 18969
Ph- 215-453-1025
Fax- 215-453-1012
Cell- 610-762-0318
2 votes Thank Flag Link Tue May 6, 2008
Good question! You have it absolutely right!!
Mortgages with little down payment DO help people get started that have never saved up for a downpayment, but that means that their payment will be higher than yours if you have 10 or 15% or more down.
Also keep in mind that if you are able to put 20% or more down, you will eliminate the "Mortgage Insurance Premium" (MIP), which does nothing more than insure THE LENDER against loss if YOU default. What it does for the borrower is nothing, except make that higher percentage loan to value mortgage available. Saving a down payment is still good advice.
Keep thinking and asking questions. Old fasioned financial advice is still rock solid.
1 vote Thank Flag Link Tue May 6, 2008
Hello Ronnie,

What you need to consider is what you will pay now are later. Determine what your loan amount will be and look at how much you pay over the life of the loan. Also to be considered is PMI. Some lenders like BOA as you asked about in the last post have programs with no PMI. But this is only available to those with 700+ FICO scores. So in most cases putting less than 20% down would incur a PMI fee. In today's market a buyer will need at least 3% of the purchase price to qualify for a FHA loan. However the DTI(debt-to-income) ratio will be lower than it would be with a conventional loan. Ronnie you should invest some time in a buyers consultation. This service is free of charge. More importantly you'll be able to find all the programs that are available to you and what is actually involved in putting together a loan. Feel free to call me anytime direct 609-876-5817 or visit my site at http://www.YourPhillyHomeSearch.com
1 vote Thank Flag Link Tue May 6, 2008
Because it enables someone who is renting, to pay that monthly amount towards thier own home, and build something for themselves, rather than fill the landlord's pockets:)

Many young people who are renting have no savings, but they pay rent, and can afford a house.

We now have 100% loans with no PMI just for people like this in our state of Pennsylvania.
0 votes Thank Flag Link Tue May 6, 2008
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