ARE YOU MAKING THE RIGHT DOWN PAYMENT?

Okay, you're getting ready to start looking at houses to buy.

You have a pretty good idea what price range you will be looking in, but what about the down payment?
How much will you need to be prepared to put down if any and how much will that be?

The average in buying a house is between 5% and 10% down payment. For example, if you were looking to buy a$100,000 house with 5% down, which would be $5,000, the remaining$95,000 would be financed with a Lender. Let's say you have owned that house for one year and the property appreciates in value by 10%, making it's value at $110,000. What that means is that you have gained $10,000 on your initial investment of $5,000 - which is good right?. That is considered high-leverage and is actually a great return on borrowed money.

However, with any investment, especially real estate, profits can go up ordown. Going with this same example of a $100,000 house and a 10% down payment, if the value of the house goes down in that first year by $10,000, you now own a house worth $90,000, meaning you have lost 100% of your initial investment. Just remember, that if value does go down, there are several things that can just as easily bring it right back up.

The more you put down, the less money will be financed in your mortgage, meaning as an advantage your monthly payment will be lowered. If you can put more down, the better in terms of saving on interest. However, not everyone is in that position so rather than putting yourself in a tight financial situation each month, you might consider waiting another year to save a little more or you can use a ZERO DOWN program.

Remember, if your down payment is minimal, the choice of loan problems will be limited. In addition, if you are using a gift as your down payment, there are other limitations, and if you need the lender or seller to help cover some or all of the closing costs, there will be even further limitations on the amount they can contribute. . Finally, if you plan on using money from your 401-K or retirement plan, there will be different loan programs and rules.

Just maek sure you account for all your expenses as best as you can. Whether you buy a new or used home, there will be expenses once you move in. For new homes, there are appliances, draperies, blinds, etc. and for used homes, there are usually some repairs. When deciding the amount to use toward a down payment, just remember to keep a little tucked away for those other expenses.

If you aren't sure about which direction to go, you can always take some time to meet with a loan officer or financial consultant to determine how much of a down payment is best for your specific situation.

To get more information on loans and what options are best for you feel free to contact us for a free consultation.

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Mark Linder
New Century Realty Group
Phone: (469)879-2960
Mark@MarkJLinder.com