Yes, a bigger down payment usually means more equity in a house from the get-go along with a smaller monthly mortgage payment. But, sometimes a bigger down payment is NOT always better or even necessary. There are programs available that don’t require the traditional 20% down payment and make perfect sense for many buyers.
You can struggle for years to save money for a down payment and put off buying only to find that prices of homes have gone up and so have mortgage rates. Every month that you don’t pay your own mortgage, you are paying someone else’s mortgage. You are contributing to building wealth for someone other than yourself. When you are paying a mortgage, you are building equity. Also, if you own your own home and it appreciates good for you, but if you wait to buy and homes appreciate that’s not good for you!
Appreciation and equity are the biggest considerations, but other financial factors may influence your decision to buy a home, such as:
- Rent Increases
- Other regular costs associated with renting, like parking and pet fees, laundry and renter’s insurance
- Other regular costs associated with buying a home, like maintenance, taxes, and insurance
- Closing costs
- Life Events
- Other saving goals
- The cost of new appliances, furniture or lawn care equipment
- Resale potential
These are all practical reasons to examine when considering buying a home. Even though many experts advise using practical logic and not letting your emotions get in the way when choosing the time to buy, emotions are very hard to ignore.
So, if you are struggling with the decision, it is good to know that there are practical financial options available even if you don’t have a lot of money for the down payment. There are programs which offer down payment assistance in most counties in the US. Many of these programs are unknown to eligible borrowers. For example, many of the “millennials” who are renting now that have a good income and good credit would benefit greatly from a down payment assistance program.
An FHA loan has the option of putting a low 3.5% down payment. FHA loans are more flexible with credit scores as well if that is an issue. Conventional loans such as; a 30-year fixed rate loan, have a 3% down payment option. They require PMI (private mortgage insurance), which can be included in the monthly payment. And finally, if you are a veteran, there is a 0% down payment option for you!
Mortgage rates are at two year low, so now might be the time for you to make a purchase!
It makes sense to reach out to a lender to find out more about these down payment assistance programs and low down payment options. You may be closer to buying a home than you think.
Buying a home can greatly improve the quality of your life as it can fulfill your desires for stability, privacy, freedom, more space for family and pets, or just having a place of your own. Take the first step and let Mortgage Equity Partners to Lead You Home!