What to Know About Your Down Payment

What to Know About Your Down Payment

What to Know About Your Down Payment

Many may have told you that a 20 percent down payment is required in order to qualify for a mortgage, but what is the whole truth?

“How much of a down payment should I make on my prospective home?”

This is a question that every would-be homeowner asks before they take the plunge into homeownership. If you are a person that has saved a lot of money in the bank but have a relatively low annual income, a big down payment may be the most logical action to take. This is because a high down payment decreases your monthly payments.

But, perhaps your situation is the inverse of the one described above.

You might make a pretty good annual income but have very little saved up in the bank. If this is the case, you may want to consider a low- to no-down payment while you plan to cancel your mortgage insurance in the future.

What is a down payment?

A down payment is the amount of cash you pay upfront and put towards the purchase of a home. They vary in size for each home, so they are often referred to in percentage points as compared to the price of the home.

Is making a large down payment risky?

Many people believe that a 20 percent down payment is best no matter what. But that is not always true. A down payment will lower your home’s return on investment–that is, the net amount of money you make after you sell your home, especially if your home’s value grows as the years pass.

Before you take a huge risk on a huge down payment, contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. For all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California.