You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home.
The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.
But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.
The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.
The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.
THE HAPPY MEDIUM
Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.
In a competitive market you’ll need to leverage every opportunity to make your offer stronger than your competitors. In these cases consider making a larger down payment to communicate to your seller that you’ve really got skin in the game and are willing and able to use your liquid capital to beat other offers to win the deal.
Need a Realtor to help you win the home of your dreams? Looking for a professional to guide you through a smooth home sale? Give me a call!
As your REALTOR®, I will review listings you are interested In and share my insight on the features, location and amenities. I will also educate you on the 5 major systems of the home, to teach you how to be a better homeowner. Plus, I can also help you get your property ready to sell, if you are considering upsizing or downsizing. Learning what your specific needs are, is the key to helping you reach your specific real estate goals. Let me be your guide through the home selling, and buying process. Call me today at 720.675.7355 or email me at Donnasmojo (@) gmail.com.
Author:Donna Hickey Hansen Phone: 303-949-3393 Dated: September 11th 2018 Views: 310 About Donna: As a Realtor and real estate investor, I love finding first time home buyers, move-up buyers and inv...
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Try it before you buy it. Interesting concept for a real estate trans
"We cannot thank Jim & Julie and the team at Ion Real Estate enough!!! We were very impressed with Jim's knowledge of the business and his drive to find us our perfect home; from the lender-side and how to get the best deal to the realtor-side and everything in between. As first time home buyers we really appreciated Jim's direction in gathering everything we would need. In addition to Jim's wonderful guidance, Julie was exceptional to work with too. She was always willing to listen to our concerns and was very encouraging on our journey hunting down our first home. She is so dedicated that she found us "our" home during the holidays and we were under contract by New Year's, which was a great way to start off the new year. She found us our dream home, in a great location and we couldn't be happier. I always recommend Jim, Julie and Ion whenever someone I know says they are looking to buy or sell their home. Go with Ion, they make dreams come true.
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