When you buy a home, there are sure to be some challenges that you’re going to face. One of those challenges is saving for a down payment.
True enough, a lot of American homeowners still think that saving up a lot of money to put down on their home is one of the hardest obstacles they had to face.
But then again, there are several mortgage programs in the market today that would only require little or no down payment. And it’s not surprising that a lot of aspiring homeowners are leaning toward qualifying for these programs. After all, who wouldn’t want a much affordable way to buy a home?
Remember that it’s always a rule of thumb to at least try and put down 20% of the amount of the home you want to buy. While there are a lot of low down payment mortgages around today, there are still reasons why saving for a down payment is still a smart move.
You’d get a mortgage with a lower interest rate
Usually, when a borrower is able to put down a higher down payment for a home, the interest charged on a loan would typically be lower than when you put down a smaller amount.
Having a lower interest rate will help you save a lot of money over the life of your loan. Other than that, putting down at least 20% down would allow you to avoid having a private mortgage insurance (PMI). This is typically an added cost for mortgage programs with lesser down.
You’ll get lower monthly payments
Since putting down at least 20% down on a house would let you have a lower interest rate, you’d only be required to pay a smaller amount of monthly mortgage payment.
While you’ve given much effort in setting aside a big amount as you’re saving for a down payment for a home, your monthly mortgage due would be lesser. Which means you don’t have to strain yourself or worry much about coming up with a lot of money for your mortgage.
Build equity on your property immediately
Putting a down payment on the home you’re going to purchase would immediately build equity in the property. That said, by putting down a significant amount, you’d equally build more equity.
This would help you safeguard your home in the event that the mortgage market turns down briefly.
Shows a good impression toward lenders
Having a significant amount of money for a down payment gives an impression that you are financially responsible enough to carry out a mortgage. Lenders don’t just give out loans to anyone who wants one.
Sure, your credit score and debt ratio is one way of showing that. But being able to come up with enough money to use as down payment would be taken into consideration, too.
Keep in mind that the lesser amount you invest in your home, the higher risk your risk would be for lenders. Therefore, you’d still have a better chance of qualifying for a mortgage or get a lower monthly mortgage once you start paying your loan.Click to See the Latest Mortgage Rates»