In general, what percentage deposit do you need to put down on a house to get a competative interest rate?

Question

I'm looking into buying a house and weighing out getting one sooner with no despoit at a higher interest rate rather than later but with a deposit. In general, what percentage deposit do you need to put down on a house to get a competative interest rate?

Answer 1

The interest rate is only slightly higher when you don't put a down-payment. Plus, you will be building that equity for that much longer, so you probably will end up doing better buying soon.

Answer 2

Everything written so far is generally true, one thing you should really figure out is how long you plan on being in the house. If this is your first home and you may want to sell in a short amount of time, then looking into a short term loan is a good idea. These programs provide better rates as well. That can off set the hit to the interest rate for not putting any money down. If it is a place you plan on staying for a long period of time, you may want to put the moeny down so you can get into a loan that will have a competitive rate for the entire loan. Refinancing has a cost and if you do a loan that you will want to refinance in 2 years(due to the high rate 2nd you would need to purchase at 100%), then you will have to pay money to do that. Which is a cost you wouldn't need if you had the down payment.

Answer 3

There's a lot of variables that make up an interest rate, and one of the major ratios is the "loan-to-value" ratio, and the "combined loan-to-value" ratio. Most lenders have an adjustment to price for going over 80% of the value of your home. So, the magic number would be 20% down. However, since most borrowers don't have that kind of money sitting around there are many competitive loan programs that allow you to go to 100% of the value. You will pay a premium to do so, which usually comes in the form of "points". However, you may be able to take a little bit higher of a rate to avoid paying these points out of pocket.

Lenders usually break it down in 5% increments, so borrowing 90% of the value of the home would be cheaper than borrowing 95%, and so on.

Answer 4

Your interest rate will depend on alot - mainly your credit rating. The more money you put down, the less rate you will pay if you credit is okay. For instance, a loan with no money down (100% financing) has a higher rate because it's considered high risk. If you can put 20% down, that would be ideal since you will lower your rate, but also you won't have to pay private mortgage insurance each month.

Answer 5

It doesn't make that great a difference actually regardless of what your loan officer has told you. Generally it is .125 - .25% higher when you go 100%.