WHICH DOWN PAYMENT STRATEGY IS RIGHT FOR YOU?
This is a big question that my team and I get from buyers when we first meet! “Hey Cyndi, how much do I need to put down?” Well, 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 (PMI) 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. This is also something that I lean into my preferred lender to help guide what is best for you in your current financial portfolio!
If you want more details please call me at 661-510-5516!
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There can be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash upfront, even if you have the money available.
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“Turning Houses Into Homes” Cyndi Lesinski Cyndi Lesinski and Associates CAL DRE # 01343529 VIP Realty Group DRE# 02023078
