A brand new house without any money down? Yes, please! That’s what so many buyers think these days. Visions of new furniture and hardwood floors begin to dance through their heads as their mortgage lender tells them that they could actually qualify for a mortgage that does not require any (or much) money down, and homebuyers are in love with this. It sounds too good to be true, and it is. Sure, you might have some cash in your pocket if you don’t have to put it down but financially speaking, it’s a terrible idea. We’re here to tell you why you should ignore the ‘no/low down payment’ options and put money down.
You’ll be Upside Down
Do you want to start off your homeownership upside down? No; you don’t want to finance 100% of your home, because you’ll have no equity. It’s a negative concept, and it’s not a good idea. What happens if your house falls in value in a changing market? You can’t sell if you wanted to.
You’ll Pay More
Not only will you pay tens of thousands of dollars in additional interest over the life of a 100% loan, you’ll also have to pay something called Private Mortgage Insurance. It’s expensive, and you’ll pay that for years until your house is no longer financed for the full value.
You Can’t Buy as Much House
Let’s say you have $50,000 to put down on a house, but you choose not to. You’re qualified for a $150,000 mortgage. If you put that money down, you could buy a home worth $200,000, technically. That down payment would put your mortgage where it needs to be, give you equity and still be a slightly larger than 20% down payment. Otherwise, you have a $150,000 house with no equity and it might not be what you want.
You’ll Have a Cheaper Mortgage
Married to a banker, my husband would never have allowed us to buy either of our homes without at least 30% down. He believes in that wholeheartedly, and I’m all right with that. Our loans for our dream house are barely more than our mortgage in our starter home (but three times larger) because we put so much money down. You can’t beat that.
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