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WHICH DOWN PAYMENT STRATEGY IS RIGHT FOR YOU?

12/8/2020

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You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.
But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.
THE DOWNSIDE
The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.
THE UPSIDE
The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.
THE HAPPY MEDIUM
Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.
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    Owners Jorge Aldrete & Josh Bibler 
    ​Co-Author Lisa Barrientes

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ELITE FINANCING GROUP
3415 gREYSTONE dR. sTE#205
aUSTIN, tEXAS 78731
nmls 212369 - aUSTIN

ELITE FINANCING GROUP
2301 OHIO DR. #135
PLANO, TEXAS  75093
NMLS 1830193 - PLANO

Hours

M-F: 9am - 5pm

Telephone                              

512-587-9500
512-699-5267 
                             

Fax

512-233-2474

Email

[email protected]
  • Home
  • About Us
  • Our Team
  • Loan Programs
  • Contact
  • Get a Quote
  • Join our Elite Team
  • Mortgage Calculator
  • Disclosure
  • Blog
  • Elite Team Fun