How Much Money to Put Down?
Tim McLaughlin
Getting a low down payment mortgage can provide you with a means to purchase a home without coming up with a large amount of money upfront. While this type of mortgage can be beneficial, there are a few potential drawbacks that you will need to know about to analyze if putting more money down is right for you. Here are a few things to consider about low down payment mortgages.
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How much money to put down 7.9.10
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Getting a low down payment mortgage can provide you with a
means to purchase a home without coming up with a large amount of Date Economic Release Prediction Last
money upfront. While this type of mortgage can be beneficial, there
are a few potential drawbacks that you will need to know about to
analyze if putting more money down is right for you. Here are a few 7/13 IBD/TIPP Eco Optimism - 46.2
things to consider about low down payment mortgages.
7/13 Monthly Budget Statement -$75.0B -$135.9B
Low Down Payment
With a standard mortgage without mortgage insurance, you are 7/13 ABC Consumer Confidence - -42
going to have to come up with at least 20% of the purchase price out
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of your pocket. This can be a very significant investment for first time
homebuyers or when you get into more expensive homes. When you
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opt to go with a low down payment mortgage, you will be able to
invest a lot less of your own money. For example, with an FHA loan,
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you can put down as little as 3.5% of the purchase price.
Keep Reserves 7/14 Import Price Index (YoY) - 8.6%
The biggest benefit of getting this type of mortgage is that you are
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going to be able to hold onto your cash reserves. When you put a
substantial amount of money down, this is going to cut into the
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amount of savings that you have. Being able to have a large amount
of money in savings is going to be beneficial in a number of different
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ways. You will have capital available to invest, to furnish your home,
for emergencies, and with higher reserves, that will also help in the
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qualification process.
Private Mortgage Insurance 7/15 PPI (MoM) -0.1% -0.3%
One of the drawbacks of getting a low down payment mortgage is
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that you are going to have to obtain private mortgage insurance.
Private mortgage insurance is a type of insurance that you must pay
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in lieu of putting 20% down. The investor is going to require this in
order to insure themselves against the possibility of you defaulting on
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the mortgage. If you default on the mortgage, the private mortgage
insurance company is going to pay the lender a part of the balance
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that is owed. Private mortgage insurance is going to add money to
your monthly payment, however, once your loan to value reduces to 7/15 Continuing Claims - -
77.5%, via appreciation or via principal reduction, the mortgage
insurance may be removed. 7/15 Industrial Production 0.0% 1.3%
Interest Rate
7/15 Capacity Utilization 74.2% 74.1%
Something else that you will want to take into consideration is the
interest rate. Many times, lenders are going to give you a lower 7/15 Philly Fed Survey 10.0 8.0
interest rate when you make a larger down payment. Therefore, you
are going to have to decide whether putting a small amount of money 7/16 CPI (MoM) 0.0% -0.2%
down is going to be in your best interest in the long run. If your
interest rate is higher, your monthly payment may increase. 7/16 ex Food/Energy 0.1% 0.1%
Making the Decision
7/16 CPI (YoY) 1.2% 2.0%
If you can get a low interest rate and the private mortgage
insurance is not too unbearable for you, getting a low down payment 7/16 ex Food/Energy 0.9% 0.9%
mortgage can be beneficial. Just make sure that you are not going to
be paying too much money overall so you can avoid paying extra 7/16 U of Michigan Confidence 75.0 76.0
upfront. Need help analyzing? Ask us how!
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