If you’re just getting into the real estate market, you may have heard that 20% down is the ideal percentage in order to lower your monthly payments and get your mortgage application approved. However, while 20% is often suggested, many people struggle to come up with this amount of money. If you’re staving off home ownership, here are some reasons you may not need to hold off as you long as you thought. This doesn’t even take into account the special “bond programs”, FDA, and other specials that often apply to Chandler real estate; especially for first time home buyers.
Minimizing Your Insurance Costs
Putting down 20% of the total purchase price of your home is often suggested, but it doesn’t definitively mean that your application won’t be approved if you don’t. If you have a good credit score and are in good financial standing, putting less than 20% down means you’ll have to pay Private Mortgage Insurance (PMI); however, it can be worth paying the extra funds in order to get into the real estate market sooner and start paying into your most significant investment. I have been a Chandler Realtor since 2003 and SELDOM have I ever sold a home in Chandler where the buyers put 20% down.
Mortgage Programs For Less Than 20%
It may seem less possible to buy a home if you only have 5 or 7% of the purchase price, but there are many programs in the United States that enable those with limited funds to apply for a mortgage. From the Federal Housing Administration (FHA) to Fannie Mae and Freddie Mac, there are many lenders that can offer you mortgage programs that will work for your situation. While higher rates come in tandem with a lower down payment, there are options out there for those who haven’t saved quite enough. A common practice at one time was to take a second loan out to reduce the first loan to no more than 80% of the loan to value; this avoided the buyers from paying the mortgage insurance. I haven’t seen too many of these loans on the Chandler homes for sale that I have been involved in during the recent years after the real estate crisis. I’m sure they are out there and; sometimes on rare occasion the seller will carry a note for a short time (1-5 years) to assist the buyer in lowering their payments thus avoiding PMI costs.
Why Put Down 20%?
Putting down 20% is not a necessity for mortgage approval or purchasing a home, but it can be a great means of saving money in the long run and reducing your interest rates. If you’re raring to get into the real estate market and don’t want to wait for the bills to stack up, that’s OK, but if you want to hold off and save up additional funds before diving in, this can mean more money and a more solid investment in the future.
20% is often the magic number when it comes to a down payment on a home, but you don’t require this percentage of your home’s price in order to get approved for a mortgage. If you’re currently considering diving into home ownership and would like to know more about the opportunities in your area, contact your local mortgage professional for more information. I have been a very successful Chandler Realtor and by reading my reviews and resume on this website, you will see that if there is an agent who knows how to “Think outside the box”… I’m the Chandler Realtor you need to speak with. Please contact me for an absolutely no obligation consultation about your financing and home search today!