You plan on buying a home, you find a home you want, you contact an agent to help you with your home buying process, and then you figure out that the average down payment on a house is 20%, but you also have the choice to pay a lower percentage, now the question is:
Should you put down less than 20% of the purchase price or not?
There’s no exact answer to how much down payment you need because it depends on your budget. If you can put down that 20%there would be a lot of benefits that come with it.
- Your interest rate could get lowered. Since you’ve paid a higher amount initially, your overall owing total would be lowered, and since interest rates are generated from that remaining balance the rates could be lowered. This could give you some financial flexibility in the long run.
- You’ll ultimately pay less for your home. The larger your down payment, the lower your loan amount will be for your mortgage. This will save you money on interest payments in the long run.
- Your offer would most likely stand out. Of course, every seller wants to pick the highest offer for their home, however, they will always give strong consideration to the larger down payments.
- There’s no need to pay Private Mortgage Insurance. PMI is an added insurance policy for homeowners which serves the purpose of protecting the lender when the borrower can no longer pay their mortgage. That being said, if you put down less than 20%, then your lender will view your loan as “risky”, so the purpose of the PMI here is to help them recover their investment in you when you can’t pay your loan.
With all of this said, the bottom line is that if you’re going to buy a home, then you ought to consider a 20% down payment. Seek professional advice from our experts here at Landon Pacific to make your homeownership dreams a reality.