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3 Considerations When Making A Down Payment "Stevie D." ReMax

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Real Estate Agent

3 Considerations When Making A Down Payment

One of the challenges you will face when deciding how much money to put down on your new home is whether to put down a larger down payment or to take a bit of money from your down payment and use it to pay "discount points" to lower your interest rate. There are pros and cons to doing both and each borrowers’ situation will be different so it's important to understand which option is best for your individual need.

Some factors you should consider include:

  • Cost of borrowing - generally speaking, to lower your interest rate will mean you pay a premium. Most lenders will charge as much as one percent (one point) on the face amount of your loan to decrease your mortgage interest rate. Before you agree to pay discount points, you need to calculate the amount of money you are going to save monthly and then determine how many months it will take to recover your investment. Remember, discount points are normally tax deductible so it may be important to talk to your tax planner for guidance
  • Larger down payment means more equity - keep in mind, the larger your down payment, the less money you have to borrow and the more equity you have in your new home. This is important for borrowers in a number of ways including lower monthly payments, potentially better loan terms and possibly not having to purchase mortgage insurance depending on how much equity you will have at the time of closing
  • Qualifying for a loan - borrowers who are facing challenges qualifying for a loan should weigh which option (discount points or larger down payment) is likely to help them qualify. In some instances, using a combination of down payment and lower rates will make the difference. Your mortgage professional can help you determine which is most beneficial to you

There is no answer that is right for every borrower. All of the factors that impact your mortgage loan and your overall financial situation must be considered when you are preparing for your home mortgage loan.

Talking with your mortgage professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.

 

 

For more helpful tips and info about the Purchase or Sale of your South Barrington, Barrington, Schaumburg, Streamwood, Roselle, and Chicago NorthWest Suburbs Home, Contact “Stevie D.” at anytime ... Direct # (630) 479-9479.

 

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Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information..thanks for sharing it with us this morning...make it a great day!

Jan 22, 2015 11:11 PM
Ted Glover
Alderman Classic Realty, LLC - Moultrie, GA
ABR in Moultrie, Georgia 229-854-5422

Steve very informative post. Giving buyers more information about how to get the most of their down payment to work for them. And it depends on their own needs. Thanks for sharing.

Jan 22, 2015 11:19 PM
Steve DeRienzo
Schaumburg, IL
"Stevie D." Your Trusted ReMax Professional"

Good Day and Thank you : )  All the Best !

Jan 23, 2015 02:28 AM