If you're a home buyer and are unsure if you should buy a home now with less than 20% down or wait until you have the funds for a conventional 20% down purchase than you should read this post from Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi :
Is Saving for a 20% Down Payment a Wise Pursuit?
Well ... that depends ...
Listen, I'm not trying to be evasive or cute with my answer here.
By nature ... and because I'm a Mortgage Originator ... I'm typically a huge proponent of saving money. As a rule, I firmly believe that budgeting resources and saving money should be a major focus and goal. So saying, "it depends", cuts a bit across the grain for me.
But as the old saying goes, "there is an exception to every rule" ...
The "exception" in this case, revolves around the myth supporting the absolute need for a 20% down payment when buying a home. Take note that I said myth.
Despite the number of times I (and others) have denounced this myth, it prevails. But the myth is not true or valid.
What is true: Currently, home buyers can buy with far less than a 20% down payment. Options for 3%, 3.5%, 5% ... and even NO down payment exist.
That said, the wisdom (or lack thereof) of buying a home utilizing a smaller down payment can only be discovered through a thorough analysis and assessment of the individual borrower's finances, the market in which they hope to buy, their needs, and desires themselves. Myths and blanket statements prior to a full assessment being made don't serve any borrower's interests well.
Why do I say that?
As of this writing, many housing markets across the country are experiencing steadily rising home prices. And those prices are rising at a speed that outpaces most buyer's ability to save for a down payment.
Add to that, mortgage interest rates have recently experienced some movement higher and have remained somewhat volatile. Some days they are better, others not.
Especially for those home buyers with restrictive finances or small savings, even small increases in interest rates can prove problematic. These 2 factors combined can definitely inhibit someone's ability to save for a down payment.
This dilemma surrounding down payment was brought home to me once again this last weekend. A young couple I was speaking with expressed that they were reluctant to buy until they had a full 20% down payment saved.
But upon our examination and comparison of all the factors mentioned above (rising home prices, their capability to save, current interest rate volatility) they came to a much different conclusion. Buying NOW with a smaller down payment made better financial sense for them. Even with Private Mortgage Insurance figured into a mortgage payment.
One of the beautiful things about the modern mortgage is this ...
There are typically choices, even for challenged borrowers, and options available for their consideration (even if the options can only be exercised at some point in the future).
Further: The options and choices they make will better "customize" their financing to their individual needs and circumstances.
Definitely an improvement from mortgages of the past.
If you're hoping to buy/finance a home, I strongly suggest you do the following:
- Start your search for info and advice before you hope to buy. Even 1 year prior is not too early
- Check your Credit Report and Credit Scores (Request your free report at www.annualcreditreport.com)
- Seek referrals to find an experienced and knowledgeable Mortgage Originator. (Not sure who to ask, what to ask or look for? Click HERE)
- Seek a Mortgage Originator's advice and guidance
- Ask them questions ... Get answers
- Seek their analysis of your credit and finances
- Seek your Mortgage Originator's analysis and comparisons of your financingoptions
- Proceed forward based on that advice
Only through the above route can you determine your ability to buy a home and the best and most expedient means for doing so.
If one of your goals is the purchase of a home, seek and find the best route and most economical way of successfully completing that goal. And keep in mind that no matter what you've heard, saving a 20% down payment may ... or may not ... help you accomplish that goal.
Find out which down payment option is the best personal option for you. In Chicagoland - IL - WI, let's talk today ...
* Hoping to buy or refinance a home in New Lenox or elsewhere in the Chicagoland - IL - WI region? Contact me today. I'll put my 40+ years of mortgage experience hard to work on your behalf.
I'm easily found at:
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI License #216987
American Portfolio Mortgage Corp.
Mortgage Originator - NMLS #216987
IL Lic. #031.0006220 - WI License #216987
Gene Mundt, Mortgage Originator, 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking: #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including: The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin.
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