Should You Make a Smaller Down Payment?

You’ve most likely heard the rule: save for a 20-percent down payment before you buy a home. The logic behind saving 20-percent is solid. It shows that you have the financial discipline and stability to save for a long-term goal, and helps you get favorable rates from lenders.

But there can be financial benefits to putting down a smaller down payment—one as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You might have to pay private mortgage insurance, which is a type of insurance that is typically required for buyers with a conventional loan and less than 20-percent down payment. The lower your down payment, the more you’ll pay. You could also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is currently a little less than five percent. The appreciation is independent from your home payment, so whether you put down 20-percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities. 

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. As always, it’s best to work with a team of trusted experts that can provide some answers as you explore your financing options.

Ready to close on your dream property? Give us a call today!

What Should You Negotiate?

Whether you’re a first-time homebuyer or a seasoned veteran, negotiations on a property purchase can be a little daunting and stressful. That’s why you should always work with trusted experts (like us). So, what should you negotiate when buying a home? 

Closing Costs 

Your closing costs are determined by a variety of factors, but you can expect it to be between 2% to 5% of the purchase price. Ask the seller to cover some or all of the closing costs upfront, or request a closing credit that can be used to make specific updates and fixes to the home.

Furnishings

Love how the seller has furnished and decorated the home? Buyers often negotiate keeping couches, fixtures, landscaping items, patio furniture, appliances, and more. Many sellers will agree, because they want to make the home more appealing and get the deal they’re looking for.

Inspection & Closing Timing 

Offers that include a quick inspection and closing timeline are often more attractive to sellers, especially those who have been going through the process for a long time. Just make sure you aren’t moving too quickly — even with quick turnarounds, you need to allow yourself ample time to get your financing in place and conduct proper, thorough inspections.

Home Warranty

Sellers will often agree to pay the premium on the home warranty at closing and then hand it off to the new homeowner, who is responsible for the deductible on any future claims.

Repairs

Your inspection may uncover small or large repairs needed to bring the home up to standard. You can negotiate to have these items fixed before closing or ask for a price reduction to cover the costs.

Whenever you’re ready to start negotiations on a new property, make sure you’re working with the right team of experts. We’re dedicated to making sure your closing is quick, efficient and as cost-effective as possible. Give us a call today!