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The fantastic four money-saving benefits of putting 20% on your next home.

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We wrote yesterday about how Hudson Valley home buyers could get a mortgage with less than 2% down. There are many programs available that let you put down as little as 3%. Those who have served our country could qualify for a Veterans Affairs Home Loan (VA) without needing a down payment. For some buyers who can’t afford or can’t save the 20% down to get a mortgage, this is welcome information.

What we neglected to say was, there are some significant benefits for those of you who CAN put down 20% on a home. Today, we want to talk about four reasons why putting 20% down is a good plan, if you can afford it.

1. Your interest rate will be lower.
Putting down a 20% down payment vs. a 3-5% down payment shows your lender/bank that you are more financially stable, thus a good credit risk. The more confident your bank is in your credit score and your ability to pay your loan, the lower the rate they will be willing to give you.

2. You’ll end up paying less for your home.
The bigger your down payment, the lower your loan amount will be for your mortgage. If you are able to pay 20% of the cost of your new home at the start of the transaction, you will only pay interest on the remaining 80%. If you put down a 5% down payment, the extra 15% on your loan will accrue interest and end up costing you more in the long run!

3. Your offer will stand out in a competitive market!
In a market where many buyers are competing for the same home, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence that the bank did above. You are seen as a stronger buyer whose financing is more likely to be approved. Therefore, the deal will be more likely to go through!

4. You won’t have to pay Private Mortgage Insurance (PMI)
Simply put, PMI is “an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.”

As we mentioned earlier, when you put down less than 20% to buy a home, your lender/bank will see your loan as having more risk. PMI helps them recover their investment in you if you are unable to pay your loan. This insurance is not required if you are able to put down 20% or more.

Many times, home sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their house to put down 20% on their next home.

If you are looking to buy your first home, you will have to weigh the benefits of saving a 20% down payment vs. the time and cost of continuing to rent while you save that amount.

Global Property Systems says:
If your plan for your future includes buying a home and you’re already saving for your down payment, go to our Home Buyer’s Website or click on our LinkIn.Bio to contact a Global Property Systems REALTOR® to help you search for your home in the Hudson Valley.


 

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