Home Buying Tips: 5 Reasons to Put Forth a Large Initial Down Payment
by Dan Wolf
on Saturday, December 27th, 2014 at 9:04am.
After you've decided on a home, then comes an important choice: How much money should you put down to secure the purchase? That's because, in home buying, the amount of money you put down is the determining factor for some important aspects later down the line.
Here are 5 good reasons that your initial down payment should be substantial (more than 20%).
Assured Loan Approval
Doesn't seem like an issue at first, but the amount you put down can really help your approval process. The larger the amount, the more proof to lenders that you know how to manage money and know how to save. Two traits they love to see before loaning you large sums of money.
Better and more Manageable Interest Rate
In terms of the "loan-to-value" ratio, in conjunction with interest, lenders will offer lower rates when there is a larger than average down payment. A large down payment lowers your interest and, at the same time, lowers risk associated with the lender's loan. Essentially, it's a win-win relationship.
Lower Monthly Payments
Simply, a larger down payment means smaller monthly mortgage payments. Sounds good, right? This is something to factor into the future when deciding on how much to put down.
Freedom Comes Sooner
Being strapped with a mortgage payment for 15 or 30-years can be stressful. So why not put more down when you can afford to? A larger down payment means that you will be free of your mortgage a whole lot sooner in life. Break the chains by investing big, and experience true freedom sooner rather than later.
No Mortgage Insurance
If your down payment is less than 20% of the total cost, most lenders will require that you purchase a PMI, or Private Mortgage Insurance, something that helps protect the lender later on. Make a larger down payment and avoid this completely, which will save you money in the long run. This is a huge advantage and money saver. Mortgage Insurance, or PMI, only protect the lender, not you.
Making a large down payment on a property depends on the situation. It's not for everyone, but should be looked at closely.
Not sure if the situation applies to you? Feel free to contact us at 248-9653 or visit us online at www.anchoragehomesearch.com to find out how we can help. We are a team of friendly and skilled Realtors with a wealth of experience and are ready, willing and capable to assist you to achieve your real estate goals.