Down Payment: Exploring Your Options
Financing a new home is more than just getting a mortgage. You also have to think of your down payment, which will determine how much more money you need to borrow. A higher down payment percentage can make you an attractive borrower, as well as give you more negotiating power.
Putting Down 20% or More
Mortgage brokers in Utah note that 20% percent or more is the ideal number to put down. This will help score the best rates and avoid paying private mortgage insurance (PMI), which protects the lender in case you default on the loan.
Another thing that makes a 20% down payment ideal is that you can save more money, as you will have a smaller monthly payment. It is always advisable to meet this percentage, but you need to think hard, especially if it will eat up most of your savings.
Putting Down Less than 20% (5% to 19%)
Not everyone can afford a 20% down payment, so you can put down less than the ideal amount and borrow the rest from your lender. This, however, will have higher rates and require you to pay PMI, which can add to your monthly payment. Some lenders may tell you that there is no mortgage insurance involved, but this does not mean that you can entirely skip it. Some loans may have higher fees and rates, so be sure to ask your lender about it.
Putting Down Less than 5% or Skipping Down Payment
Loans that allow low down payment are usually costlier, as they have higher interest rates and require PMI. If you decide to buy a home with little to no down payment, examine your overall rates, fees, and monthly payment. Be sure to compare different loan programs, including FHA loans, VA loans, as well as conventional mortgages.
The ideal down payment is 20%, but you still have to consider if you can comfortably afford it. You have to consider your savings, debt, and monthly income. Talk to reliable lenders to know more about down payments and your loan options.