For many people, it will be necessary to take on a mortgage when purchasing a home. And, if you’ve been a home owner in the past, then it’s likely that you are well aware that 20% is the “magic number” as it pertains to the down payment.
One reason for this is because purchasing with 20% down will eliminate the need to pay PMI (private mortgage insurance) – a type of insurance that protects the lender if you are to stop making payments on your mortgage loan. Another plus is the ample amount of equity that you’ll have in your home, right off the bat.
However, even though having a nice sized down payment can allow you to start off with a substantial amount of equity, waiting until you have this amount of money available can – at least for some – be a mistake.
For instance, with interest rates still being at low levels – and with proposed rate hikes likely in the near future – the more time that passes, the more probable it is that you’ll be required to pay a higher rate of interest on your mortgage. Over a period of 30, or even 15, years, that additional payment amount can really add up!
There are avenues that can allow you to purchase a home without having 20% down. For instance, there are many lenders that offer FHA loans with just 3.5% down. There are other government-insured loan programs that also offer approval with far less than a 20% down payment.
Are you thinking about purchasing a home soon?
If so, give us a call. Having an experienced real estate agent on your side can oftentimes mean the difference between success and disappointment when it comes to locating the ideal home for you.
With access to both listed and non-listed properties, partnering with a professional realtor could also help to lessen the competition – in turn, reducing the chances of having to submit a higher purchase offer. So, contact us when you’re ready to make your next move.