Perhaps you’ve been thinking about purchasing a home, but you’re not sure how much you need for a down payment. Many people will tell you that you need to have 20% to secure a mortgage. Thanks to various programs available to buyers, the truth is that you can put down as little as 3%. In fact, if you are a military veteran you could qualify for a Veterans Affairs Home Loan and not need a down payment at all! While these programs may mean that you don’t have to save as much and you can get into a home sooner, there are some major benefits to making a 20% down payment if you can:
- Lower Interest Rate
Putting 20% down vs a 3-5% down payment gives your lender/bank the confidence that you are financially stable and a good credit risk. With this confidence, they will be willing to give you a lower interest rate on your mortgage loan. 10 Best Mortgage Rates of 2019
- Paying Less Over the Long Run
With a bigger down payment, you will have a lower loan amount for your mortgage. That means you will be paying less interest. For example, if you make a 20% down payment, you will only pay interest on the remaining 80% of the loan. If you put only 5% down, the extra 15% on your loan will accrue interest and you will pay more over the long run.
- You Will be More Appealing to Sellers
Chances are, you will be competing with other buyers for the same home. Like the mortgage lender/bank, sellers feel more confident in buyers who are making 20% or larger down payment. They will see you as a buyer who’s financing is more likely to be approved, thus ensuring the sale will go through.
- You Will Save Money by Not Having to Pay Private Mortgage Insurance
Private Mortgage Insurance (PMI) is an insurance policy that protects the lender if you are unable to pay your mortgage. It comes to you in the form of a monthly fee included in your mortgage payment. It is required for all conforming, conventional loans that have down payments of less than 20%. If you make a down payment of 20% or more, this insurance is not required. 6 Reasons to Avoid Private Mortgage Insurance
If you are a current homeowner who would like to sell and use the equity from the sale to put a 20% or more down payment on a new home, call the TAMPA BAY real estate professionals, Linda & Craig Nowicke at Tampa Realty Now with RE/MAX ACR ELITE and let them assist you in getting your home STAGED, PHOTOGRAPHED and SOLD for the highest possible price! CALL THEM TODAY at 813-728-3880 or 813-675-5030.