Do You Need 20% Down to Buy a Home?
Industry experts are now starting to wonder if the requirement of twenty percent down to get a mortgage will no longer be the norm in the coming years. With many lenders willing to work with buyers who don’t have the full amount, the need for potential buyers to wait in order to save up a large sum could soon be a thing of the past. Instead, buyers can work with lenders to find alternative options that put them in a home as soon as possible.
Q: 20% Down– True or False?
A: Both! In many cases…
There are loans that will help buyers who do not have a full twenty percent of the home’s purchase price, provided they meet other criteria set by the bank. These lenders might take as little as five percent of the purchase price as a down payment, or even less if you are FHA approved. In return, they will likely require you to get private mortgage insurance, so be sure to factor these premiums into your monthly budget.
Are There Advantages of Putting Less Than 20% Down?
Putting less money down on your home may be a good idea for a variety of reasons, including that you may not have a large amount saved up to put down at once. Other advantages might include:
- You can keep the money on hand to use in case of an emergency, like a sudden illness or hurricane damage
- You can invest the money in a different venture that may give you faster returns than real estate, such as a business or the stock market
- You can use the money to pay down debt with high interest rates, which may be a better financial move for you in the short term.
What Are The Advantages Putting 20% Down?
Most people buy a home with at least twenty percent down because it makes the most sense if the end goal is to pay the mortgage off as fast as possible. If you put twenty percent of the purchase price down, the total amount of your mortgage is less. This makes it easier and faster to pay off. When you put down less of a down payment, you’re borrowing a larger amount from the bank, therefore it will take you longer to pay off on average.
If you’re looking for the right home to call yours, contact the Core Group today. Our team can help you find the perfect place within your budget.