The Advantages of a Large Down Payment

Most of the time, the goal is to put as little down as possible on a home, but paying more money upfront has its advantages. Here are just a few of them for you to consider.

Pay Less Interest

Putting a large down payment can save you thousands of dollars of accrued interest over the loan term. This is especially true with 30-year mortgages. 

Acquire Lower Interest Rates

A larger lump sum can also reduce your rate! Basically, the larger the down payment, the less risk it is to a lender, thus lowering your interest rates.

Supplements Poor Credit

Similarly, if you have poor credit, you can lower your rate by putting down larger payment upfront. With a large down payment, you reduce your "riskiness," and lenders can offer you a better mortgage rate, regardless of credit score.

Avoid Mortgage Insurance

If you opt for a conventional mortgage, a substantial down payment can help you avoid paying mortgage insurance. To qualify, you must have a loan-to-value ratio (LTV) of 80%. That means that you'll need to make a down payment of at least 20% of the home price. 

But what if you can't afford a large down payment?

If you're unable to put down a large sum all at once, there are still affordable options! Consider the following loans and contact us to learn more about each of them (and more!):

Federal Housing Administration (FHA) and Veteran Affairs (VA) loan provide better financing options for borrowers making a small down payment. 

For example, FHA mortgages require as little as 3.5% of the total loan cost for a down payment. VA-eligible borrowers have no down payment options along with inexpensive closing costs.

There is also the option of waiting and saving for a large down payment. However, with government loans, it may not be necessary. Contact us today to see which is the fastest and most affordable option for you. 

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Deborah McNaughton

Your Mortgage Advisor for Life

President of Legacy Financial Services
Author - Radio Host - Columnist
Nationally recognized "mortgage and financial" expert
Seen on CNN, Bloomberg, Good Day NY and others

Host of the Money Manager show on KKLA 99.5FM

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