The Advantages of a Large Down Payment
Most of the time, the goal is to put as little down as possible on a home, but paying more money upfront has its advantages. Here are just a few of them for you to consider.
Pay Less Interest
Putting a large down payment can save you thousands of dollars of accrued interest over the loan term. This is especially true with 30-year mortgages.
Acquire Lower Interest Rates
A larger lump sum can also reduce your rate! Basically, the larger the down payment, the less risk it is to a lender, thus lowering your interest rates.
Supplements Poor Credit
Similarly, if you have poor credit, you can lower your rate by putting down larger payment upfront. With a large down payment, you reduce your "riskiness," and lenders can offer you a better mortgage rate, regardless of credit score.
Avoid Mortgage Insurance
If you opt for a conventional mortgage, a substantial down payment can help you avoid paying mortgage insurance. To qualify, you must have a loan-to-value ratio (LTV) of 80%. That means that you'll need to make a down payment of at least 20% of the home price.
But what if you can't afford a large down payment?
If you're unable to put down a large sum all at once, there are still affordable options! Consider the following loans and contact us to learn more about each of them (and more!):
Federal Housing Administration (FHA) and Veteran Affairs (VA) loan provide better financing options for borrowers making a small down payment.
For example, FHA mortgages require as little as 3.5% of the total loan cost for a down payment. VA-eligible borrowers have no down payment options along with inexpensive closing costs.
There is also the option of waiting and saving for a large down payment. However, with government loans, it may not be necessary. Contact us today to see which is the fastest and most affordable option for you.
Our user-friendly calculator puts you in charge of estimating your mortgage payment.Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.