Buying a house comes with some very substantial upfront costs, the largest of which is the down payment. But in today’s economy, it’s difficult for home buyers to save up for a down payment. Many buyers, then, just aren’t sure how much they should put down. So let’s see how much you need to put down when buying a house in Atlanta is your contribution out of your pocket toward the purchase, thus representing your ownership stake in the house. The longstanding traditional down payment has been 20%, which is a big chunk of change, but other lower down payment options are available today.
Traditional 20% Down Payment Cons
It used to be that most lenders required a 20% down payment, but few lenders today require that. But if you can put 20% of the purchase price, you’ll enjoy some significant benefits, so buyers who can do so often should – but not always. So before you jump and make such a big down payment, consider the cons . . .
- There’s more financial risk because once you make that 20% down payment, it’s all but impossible to get it back. So you may be better off paying less down so that you’ll have an emergency fund in reserve.
- You’ll have less cash on hand for repairs and other emergencies that crop up. Inevitably, homes heed repairs (sometimes large ones) no matter how good of shape they appear to be in. And you never know when your care will break done or something else may go wrong.
- For most people, saving enough money simply takes a long time to put 20% down. And that means they have to defer their dream of homeownership and may have to live cramped up in a tiny apartment much longer.
Lower Down Payment Options
Today, though, you have options for lower and even no down payment mortgages, for example . . .
- VA Loans – Backed by the U.S. Department of Veterans Affairs, VA loans are designed for current and veteran military members and eligible surviving spouses. They have no down payment requirement.
- Some Conventional Loans – Some conventional lenders who follow the guidelines set by Fannie Mae and Freddie Mac offer mortgages with a down payment requirement of as low as 3%.
- FHA Loans – FHA loans are backed by the Federal Housing Administration and require a down payment of as little as 3.5% if your credit score is at least 580.
If you’re unsure which type of mortgage is right for you and which you can qualify for, consult a Atlanta agent. To discover more, just call (404) 977-5054.
Advantages of Larger Down Payment
Saving up for a larger down payment takes time, and you may not want to delay buying a house in Atlanta that long. But you should be aware of the advantages of making a substantial down payment, such as . . .
Better Mortgage Interest Rate
With a larger down payment, you’ll get a better interest rate. And only fractions of a percentage point lower can result in substantial savings over the life of the loan.
More Equity Faster
Equity is your home’s value, less the amount you still owe on your mortgage. When you put more down, your home becomes an asset more quickly rather than a debt/liability.
Lower Monthly Payment
Because a larger down payment means less principal owed and because you can get a lower interest rate, your monthly mortgage payment will be lower when you put more down.
Lower down payment loans come with higher fees, and you will also have to pay for private mortgage insurance. With a larger down payment, you can avoid some of these fees.
Determining Your Down Payment
So how much do you need to put down when buying a house? The short answer is . . . it depends. The amount of down payment that is right for you depends on your goals and personal financial situation. Your best bet, then, is to work closely with an experienced Atlanta agent who can help you assess your situation and guide you in the best way to proceed. So if you’re considering buying a house in Atlanta and have down payment concerns, contact us at (404) 977-5054.