You don’t need 20% down to settle down
This is not your parents’ mortgage anymore; the days of having to put down 20% in order to buy a home have been gone for years. But, why do potential first time home buyers still think they need to come up with a 20% down payment in order to purchase? The answer is simple: they are being misinformed. Because so many misconceptions exist when it comes to mortgage down payments, borrowers might unintentionally limit themselves.
The landscape of the mortgage industry is constantly changing. As technology increases at a rapid pace, the mortgage industry is evolving with it. This allows for new loan options where borrowers can put as little as 3% down without PMI on conventional financing. Years ago, to avoid paying PMI, you would have had to come up with 20% down. Now, with the option of putting less down without having to pay PMI, home buying has become much more affordable for the average person.
Think about this: if you were to purchase a home for $465,000, 20% percent down is $93,000 vs. $13,950 for 3% down. What could you do with an extra 79,000 in your savings account? You could put the money back into the home--renovations to give yourself a new kitchen, new master bath, or finished basement. Regardless of what you do, you’re still in control of your money. And you get to decide the best use for your money.
Of course, there are two sides to this, right? If you put less money down, you will have a higher mortgage payment than you would with a larger down payment. One option isn’t necessarily better than the other. Knowing your options is one the most important steps in the process of deciding what mortgage is right for you. The option that makes the most sense for you and family is the right choice.
More and more first-time home buyers are choosing to put less money down and keep more money in their bank accounts. The reasons are simple, but sometimes finding the right mortgage company and mortgage professional is not so simple. Not all mortgage companies are created equal. Can one mortgage company offer loan and products that another company may not be able to provide? The answer is yes, so you must do the research in order to make the best decision.
Leigh Walker
Owner Prime Rate Home Mortgage, LLC