Ralph DiBugnara on home mortgages, down payments and the right equations for financial success.
Congratulations, you’ve decided to buy a home! Next comes the nerves and the mortgage questions. How much is too much for a down payment? How much should you leave in savings? Is 20% down the right amount? Ralph DiBugnara and Home Qualified are here to answer your questions and ease your anxiety. Follow along to learn more.
1 . Don’t leave yourself cash poor
Many buyers make the mistake of focusing on their down payment deposit rather than factoring their actual monthly payment. Furthermore, many homebuyers fail to financially plan for new furnishings and cosmetic upgrades. An equation to keep in mind, every $10,000 you apply to your down payment only equals a reduction of about $50 on your monthly payment. We advise keeping a reserve of at least two to three months worth of mortgage payments in the bank.
2. Don’t take on debt to pay for your debt
It’s never wise to deplete your cash supply. Spending your savings on a down payment only to take out credit cards and loans to pay for after purchase expenses is unwise. If you are borrowing money from yourself, such as a 401k loan, which is low interest bearing , then it’s financially feasible. Otherwise, dial back your down payment to leave room for expenses
3. 20% down isn’t always necessary
While 20% used to be the benchmark for a down payment, trends are shifting. According to the National Association of Realtors, “Most people don’t put 20% down on a home, even though it’s the benchmark most often quoted by lenders and mortgage experts. More than 70% of noncash, first-time home buyers — and 54% of all buyers — made down payments of less than 20% over at least the past five years.” Programs today offer no private mortgage insurance ( or pmi) even if you put down less than 20%. Home Qualified advises it is most important that you feel comfortable with your monthly payment, regardless of the percentage you put down. If this number is feasible, your investment is a wise one!
We hope these suggestions help you in your search for home buying clarity. If you have any questions regarding down payments, debt or mortgages, please contact Home Qualified today!