When the time comes for you to choose between continuing to rent and taking the big step towards home ownership, you should factor in not just your current financial status, but also your future housing needs.
Establishing that you can indeed afford to buy a house and having a much clearer idea of how long you plan to live in it can help you mitigate risks of foreclosure and bankruptcy.
One of the crucial aspects to plan for when buying a house is the down payment. Note that almost all lenders in Tempe will base your mortgage rate on your ability to make this payment – and just how much you can make.
How much should you put down?
Mortgage companies have different requirements when it comes to down payments. However, you will find some requiring their borrowers to put a down of as low as just 3% of the property’s selling price.
For instance, the house you would like to buy sells for $200,000. This means you should put $6,000 down to meet the minimum required down payment of 3% and secure the sale.
Making a bigger down payment
Paying more upfront for securing a home purchase benefits you in the long run. Yes, you would have to make at least a 20% down payment to reap these benefits, but know that doing so can considerably reduce your overall home buying cost.
By putting down a bigger payment, you no longer have to worry about purchasing mortgage insurance, which can significantly increase your home loan expenses. Your mortgage payments will also drop since the lending company will shell out a lower loan amount to finance your home purchase.
Making a bigger down payment also makes you less risky in the eyes of lenders, so they will feel more inclined to give you a lower mortgage rate.