Dos and Don’ts of Making a Down Payment
If you want to buy a home, chances are you’ve been budgeting for your down payment. However, there’s much more to making a down payment than just having the funds. From sizing your down payment correctly to accounting for additional closing costs and fees, down payments are much more than meets the eye.
Partnering with the industry experts at Mark Spain Real Estate will take the stress out of the home-buying process. Offering exclusive market insight, we can help you navigate all the complexities of making a sufficient down payment on a house. With our help, you can land your dream home with funds to spare! Read below for our dos and don’ts of making a down payment.
Dos and Don’ts of Making a Down Payment
Do: Maximize Your Down Payment
As a home buyer, the size of your down payment will vary based on the property’s sale price and the type of mortgage you’re applying for. However, the consensus is that the bigger the down payment, the better. Though it may slow down the home-buying process if you need time to save up, larger down payments are well worth the wait. Some advantages of larger down payments include the following:
Better Mortgage Interest Rate
Generally, mortgage lenders offer more generous rates if you put forth larger down payments. You lessen your lender’s risk when your initial ownership stake in the home is higher, swaying lenders to deduct percentage points from your interest rate.
Lower Monthly Mortgage Payment
The less you borrow from your lender, the less you’ll pay in interest over the loans’ Lifetime and the smaller your monthly payment increments.
More Instant Home Equity
Putting down a sizable down payment gives you more home equity straight away. Home equity is your property’s market value after deducting your mortgage loan. Therefore, the smaller the loan means, the more your home is an asset rather than a debt, making you a wealthier homeowner.
Don’t: Forget about Closing Costs
When budgeting for your down payment, you’ll also want to consider your closing costs. Typically accounting for 2-6% of the home’s purchase price, closing costs consist of administrative fees, including appraisal, title search and insurance, underwriting, etc. One of the most common home-buyer mistakes is underestimating these closing expenses and overestimating your affordability. To ensure you don’t make this fatal error, talk with your real estate agent about how to prepare financially for closings and get a closing cost estimate from your lender.
Do: Keep Savings in the Bank
One of the worst things you can do as a home buyer is blow your savings. Because a home is a significant investment, you’ll want to leave plenty of financial wiggle room for monthly mortgage payments and other ongoing homeownership expenses. Otherwise, you might spend most of your income on ownership, leaving little budget for other essential expenses like retirement, debt, and travel.
Don’t: Limit Your Options
As you look for mortgage lenders, remember to keep your options open. Rather than committing to the first-rate you receive, do your research and get estimates from at least 3-5 different mortgage lenders. Additionally, you might also consider lenders who offer down payment assistance options. These can be especially helpful for first-time home buyers needing financial assistance with their first mortgage.
Do: Plan for the Future Homeownership Costs
It’s no secret that homeownership comes with its fair share of costs. From maintenance and repairs to property taxes and HOA fees, homeowners have several financial responsibilities that they must uphold. When making a down payment, you want to ensure your budget has room for all the other miscellaneous costs of buying a house and emergency money for a rainy day.
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Are you making a down payment on a home? The industry professionals at Mark Spain Real Estate are here to help you throughout the home-buying process! With decades of industry experience, our real estate professionals promise unparalleled client satisfaction! Check out our Guaranteed Offer Program for the potential to receive a competitive cash offer on your home in only 21 days. Contact our agents today!
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