We are attempting to buy a new home, is recommended to make down payment or none?

Question

Has been suggested to make 5-20% down, but want to save the money so we can landscape the yard and the extra essentials possibly needed with a new home.

Answer 1

Generally speaking, you get a lower interest rate if you put more money down. Of course, the more you pay up front and the less you borrow, the lower your monthly payments will be.

I generally like to pay 20 percent down on a home but it's easy to understand that many people can't do this. Talk to your banker and find out if you pay an interest penalty or additional points if your down payment is reduced. If there is no penalty, you might as well go with the lower down payment.

Answer 2

Hidden within your question are a number of issues that you may want to take in consideration.

Buying a house is a big deal, and not just on a financial level, it is as much as a commitment as is getting the right education, or even getting married.

It takes a lot of preperation, research, kicking of the tires, viewing properties, talking with banks, mortgage brokers, the city building departments, doing inspections, walking the neighborhoods, etc etc etc.

One of the many issues is the financial structure and best possible way to finance a property, and your financial ability to purchase and or finance it.

If this is your own home and you are using this property stricktly as your personal residence, the best mortgage is no mortgage at all. Keep in mind that over the life of a mortgage (typically 25 years) you will have paid the loan amount 3 times over.

In my mind that is 200 % interest, hmmm that makes it sound a little different from what banks and or financial institutions make you want to think about things, isn't it.

So when you think about the home "essentials" as you referred to them, say the yard, each thousand dollars you spend in it, instead of putting it into the down payment, will cost you $ 3,000, now the yard seems to start costing an lot doesn't it.

My advise, The so called essentials, should take a back seat to making the home cost as little as possible on a monthly base and to pay off the mortgage as quickly as possible, make extra payments, take advantage of pre-payment priviledges, if the mortgage company offers you any way of doing that, and make it automatic (as in create automatic extra payments) again any extra dollar you pay towards the mortgage principal will reduce the overl all expense by 3 dollars, not a bad return.

If and when you take full advantage of all the pre-payment options and fast track methods, you can reduce the lenght of your mortgage to as little as 8 years, instead of 25 years. Well after 8 years you can pay for all the "essentials" you want without having to worry about where the money will come from.

In addition, if you look for homes "with the right things wrong", and you put in the sweat equity, you can add value to the property in a short period of time, allowing you to possibly sell it and repeat the process a few times and becoem financial independent within 5 years if you play your cards right

In the mean time read books like " the automatic millionaire" by David Bach and "Rich Dad Poor Dad" by Robert Kiyosaki and talk to good mortgage brokers in your area, and find a Realtor that is working for you to get you financial independent in the shortest possible time.

Good Luck

Answer 3

The more you put down, the less you have to finance. This lowers your monthly payments

The more you put down (up to a certain point), the better your interest rate will be. This lowers not only the interest you pay, but also the payments.

So, you put the money down, and you have lower payments with which to pay for fixing the place a bit at a time. You don't, and you're stretched every money, with less money to handle emergencies.

Now in general, the increments that make a difference are 5%. You need a 5% down payment to hit the first price break as far as rate, 10% to hit the next one. You get the idea. It's also a good idea to hold on to enough money to make a payment or two, just in case.

Answer 4

The more you pay at the start, the less you will pay overall in the long run. If you paid off an extra $500 in the start of a 15 year mortgage, that saves something like $1500 in interest on the length of the loan. Therefore the more you can pay at the start without stretching yourselves in case of emergencies, the better. I am not sure of any reputable lenders who will give zero down - you can probably find them but the rate and conditions won't be as good. I recommend going to Wells Fargo as they have people there who will give you a lot of their time for free to talk you through all the aspects. That is who I went to when I was looking.

Answer 5

A new home needs lots of extra's believe me. Saving that money won't even make a dent. Most banking institutions do require a certain amount down so unless you can talk them out of it there is no way around it. Plus it keeps you payments down because you are borrowing less. As far as lanscaping I would do most of the work my self to save money. Landscaping is not cheap it can cost upwards of from 2000.00 for a smal lot and a few plants and maybe a little sod.

Answer 6

Along with the obvious, lower interests rates, lower payments, etc, the amount you put down on a home may also help you GET the loan. THe more you are willing to "invest" in the home at the start shows the loan company your interest in the home. THis means you are less likely later ot walk away from the house.

Answer 7

Believe it or not, you can sometimes end up with a check to yourself at the end of a closing. People don't realize how easy it is these days to by a house but yet they will spend up to $800/month for rent when it could be a mortgage payment. The key is good credit and a negotiable seller. Have the seller pay your closing cost. If your a first time home buyer their are grants you can get. Look for foreclosed houses. They have the most equity in them and you can borrow money against them to fix up the house in the future. When I bought my house, I received a $1,750 check and I had over $20,000 in equity.

Answer 8

I have always been a big believer in zero money down for first time home buyers. I did it myself a few years ago and I own my own mortgage company. The extra interest you pay is tax deduct able and you will have some cash left over for reserves. Let me know if you want some more info. I would be happy to help.

Answer 9

The more you put down, the easier it will be to get a mortgage. The interest rate may also be lower. The savings in monthly payments can pay for the extras you want.

Answer 10

You can purchase a home for less than the appraised value. Finance a little more than the asking price. Then you take the extra and use it to fix the home in any way you see fit.