When you take out a mortgage on a new home, one of the decisions you have to make is the size of your down payment.
The type of home loan you choose as well as your qualifications will determine the minimum down payment size. But beyond that, you can certainly decide if you want to pay more.
To help you figure out whether a large or small down payment will be suitable for your needs, let’s go over the advantages of both.
Benefits of a Small Down Payment
- Keep finances flexible. Many people choose to make a small down payment to keep their finances as liquid as possible.
- More money to invest. If you make a small down payment, you can take the money you would otherwise have put down on your home and invest it elsewhere to grow.
- Move into a home immediately. If you cannot afford to make a large down payment, you might not be able to move into a home for some time where one is required. But with the option to make a small down payment, you can buy a home immediately.
- Spend more money on moving expenses, repairs, upgrades, furnishings, etc. You can truly personalize your home and make it feel like your own without waiting months or years to make it happen.
Benefits of a Large Down Payment
- Your mortgage payments will be lower. Financially and psychologically, a smaller bill each month is easier to deal with.
- You might avoid mortgage insurance. With 20% down on your home or more, you do not have to pay for mortgage insurance, which can save you a lot of money over the years to come.
- Offset risk factors in your profile. A large down payment may cause lenders to look more leniently upon a less-than-stellar credit score or DTI ratio.
- You will have more equity. When you make a large down payment, you build a large amount of immediate equity. Someday you might want to make use of that equity by taking out a home equity loan or similar product.
Get Personalized Mortgage Advice With First Residential
There is probably more you want to know about the pros and cons of large and small down payments. During your consultation, we can answer all of your questions. You can share your financial scenario with us, and we can let you know some of the ways a large or small down payment might impact you. To get started, please give us a call today at (540) 838-5868. No matter your situation, we will work hard to match you with a mortgage product that serves your needs.