Down payments and homeownership

Mortgage and Lending with Guaranteed Rate NMLS# 2611 173124

Even with the current economic climate, homeownership is more reasonable than ever, thanks to low interest rates and lower home values. For buyers who manage to have a twenty percent down payment, they believe this will get them the lowest monthly mortgage expense. However, simply because buyers can afford to put down this amount does not necessarily mean they should.

Buyers who have saved enough to put 20% down on the purchase of a home may want to consider maintaining some of their cash for savings, investing or other purposes. It may sound counterintuitive, but with today’s interest rates and the competitive pricing of private mortgage insurance, borrowers can retain some of their money by putting less money down on a home and still get a low monthly payment.

Real estate professionals have a responsibility to all home buyers to help them evaluate their purchasing power. The right advice can help home buyers control their current assets while keeping sufficient reserve for any other possible financial needs.

Being a real estate expert, you are perfectly positioned to lead prospective home buyers throughout the transaction process. At the very beginning, it is vital to look at the borrower’s overall financial picture. The home buyer as well as the real estate professional should take into consideration current cash flow, debt and all future financial obligations.

Help your borrower think beyond just their interest rate and down payment, as these are not the only keys to securing the lowest possible mortgage payment. By having a general understanding of the current financing options, you can better understand what your buyer can responsibly afford, which, in some instances may be more than they think.

While you are not a financial advisor, by asking these types of questions, you can help make sure your buyers better frame conversations with their loan officer, in return, increasing the value you bring to the table and the likelihood of a constructive outcome for all parties.

For those potential buyers who have stayed out of the market over worries of declining property values, they can still purchase a home without funneling all of their available cash into the downpayment. By utilizing this strategy, home buyers are able to leverage their current assets, while still keeping a satisfactory cash reserve.

Putting 20% down on a home doesn’t always hold logic, but purchasing at a time of high affordability does. And by understanding the current financing options available to buyers, and helping them discuss what those options mean for their down payment needs or monthly payments, you can help point them in the right direction with their loan officer, overcome their investment fears and make the sale, all while assisting them realize long term goals.


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Eric Harlington

VP of Mortgage Lending
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