Saving for a 20% Down Payment?
A Wise Pursuit?
By nature ... and because I'm a Mortgage Originator ... I'm typically a huge proponent of saving money.
But as the old saying goes, "there is an exception to every rule" ...
The "exception" in this case, revolves around the myth supporting the absolute need for a 20% down payment when buying a home.
Take Note: I said myth.
Despite the number of times I (and others) have denounced this myth, it prevails. But the myth is not true or valid.
Home Buyers can buy with far less than a 20% down payment. Options for 3%, 3.5%, 5% ... and even NO down payment exist.
That said, the wisdom (or lack thereof) of buying utilizing a smaller down payment can only be found through a thorough analysis and assessment of the individual borrower's finances, the market in which they hope to buy, their needs, and desires themselves. Myths and blanket statements prior to a full assessment being made don't serve any borrower well.
Why do I say that?
Currently, many housing markets across the country are experiencing steadily rising home prices. And those prices are rising at a speed that outpaces most buyer's ability to save for a down payment.
Add to that, mortgage interest rates have recently experienced some movement higher and have remained somewhat volatile. Especially for those home buyers with restrictive finances or small savings, even small increases in interest rates can prove problematic. These 2 factors combined can definitely inhibit someone's ability to save for a down payment.
This dilemma regarding down payment was once again brought home to me this last weekend. A young couple I was speaking with expressed that they were reluctant to buy until they had a full 20% down payment saved.
But upon our examination and comparison of all the factors mentioned above (rising home prices, their capability to save, current interest rate volatility) they came to a much different conclusion. Buying NOW with a smaller down payment made better financial sense for them. Even with Private Mortgage Insurance figured into a mortgage payment.
There are typically choices, even for challenged borrowers, and options available for their consideration (even if the options can only be exercised at some point in the future).
Further: The options and choices they make will better "customize" their financing to their individual needs and circumstances. Definitely an improvement from mortgages of the past.
If you're hoping to buy/finance a home, I strongly suggest you do the following:
- Start your search for info and advice before you hope to buy. Even 1 year prior is not too early
- Check your Credit Report and Credit Scores (Request your free report at www.annualcreditreport.com)
- Seek referrals to find an experienced and knowledgeable Mortgage Originator. (Not sure who to ask, what to ask or look for? Click HERE)
- Seek a Mortgage Originator's advice and guidance
- Ask them questions ... Get answers
- Seek their analysis of your credit and finances
- Seek your Mortgage Originator's analysis and comparisons of your financing options
- Proceed forward based on that advice
Only through the above route can you determine your ability to buy a home and the best and most expedient means for doing so.
If one of your goals is the purchase of a home, seek and find the best route and most economical way of successfully completing that goal. And keep in mind that no matter what you've heard, saving a 20% down payment may ... or may not ... help you accomplish that goal.
Find out which down payment option is the best personal option for you. In Chicagoland - IL - WI, let's talk today ...
* Hoping to buy or refinance a home in New Lenox or elsewhere in the Chicagoland - IL - WI region? Contact me today. I'll put my 40+ years of mortgage experience hard to work on your behalf.
I'm easily found at:
Gene Mundt
Mortgage Lender - NMLS #216987 - IL Lic. #0006220 - WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281
Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking Conventional,
FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago
and the greater Chicagoland region, including:
The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL. etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
Your Referrals are Welcomed & Greatly Appreciated!
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