Today on the Dear Claire series, I’ll be touching base with you about down payments.
What is a typical down payment?
Obviously, that’s a hard question. What I want to talk about are all the myths about a down payment for your home. So If I’m going to go out and buy my first home, I can put as little as 3% down, I can do 5%, I can do 10%, 15% or 20%. I never recommend you go more than 20% down because you don’t get any more credit towards a potentially lower interest rate. What I mean by that is that your interest rate is sometimes lower the more money you put down, or you don’t have mortgage insurance. With a 3% down loan or 3.5% down loan, which is the federal Housing Authority or an FHA loan, there is also VA loans at 3.5% or 0% down, in those instances typically the interest rate is going to be a bit higher because the risk to the bank is going to be higher because you’re putting less money down. Sometimes it’s a great idea to put less money down, especially if you’ve got a plan and there are plenty of people out there with a plan.
If you are planning on finding a fixer-upper, and you want to do work on your house, you might want to put less money down to have more cash to be able to do the work that you want to do. Then you can eventually refinance once that work you’ve done and added value to the property. It’s also nice to just have a reserve for all the fun things that you want to buy when you get a new house, like blinds/curtains, your new couch, and all kinds of stuff like that. It’s good to have a reserve so that you can sleep at night because it’s really kind of scary buying a property whether it’s the 1st or the 10th. It’s good to have a month or two that you don’t have to worry about where that monthly payment is coming from.
With a typical the smaller down payment, like a VA loan with a zero down loan or some other zero-down loans, then you can afford your house sooner which is fantastic, especially in the housing market where the prices are increasing by 5 to 7% a year. Which is what they’re projecting for this next year. That’s still a lot of money and most people can’t save to make up the difference in what they would be able to just gain in value by just owning the home earlier.
This gets really complicated and fun! This is the stuff I really enjoy, so if you’re at all interested message me or pick up the phone and call me. I’m always here to answer any questions that you have. If you have any other additional real estate questions, you’d like me to address here, send me a message and I would happily address it for you. And then also remember to subscribe to our YouTube channel for Paris Group Realty LLC. We have easy access there to all kinds of fun things like maintenance videos, things you should be doing for your property every couple of months during the year, and all kinds of additional information.
Thanks so much for tuning in. We will talk soon. Take care.