What Should My Down Payment Be?
Jean Kaiser with Keller Williams Realty. My website is www.jeankaiser.net.
Many people ask how much of a down payment they should make. There are a lot of options here, a veteran can get a VA loan with zero percent down otherwise there’s an FHA loan at three and a half percent down. The FHA loan does have mortgage insurance and in fact any loan that you get where you put less than twenty percent down you will be paying mortgage insurance. The FHA mortgage insurance has gone up significantly in the last few years and the ability to get out of mortgage insurance down the road is a lot harder. So I encourage people whenever possible, to put twenty percent down on the home.
I think it’s a little bit of a safety net as well, considering what we went through back 2008-09 and 2010 where the market really crashed and people have max themselves out on their homes. It gives a sense of security if you have a little bit bigger down payment, it also lowers your monthly payments. Now remember that your property taxes and all of the interest that you pay on your mortgage are tax-deductible both state and federal taxes, so that is a big perk and it can be a reason to go ahead and put a little less down.
I do encourage people though not to put down all of their cash. You need some reserves. You need a couple months of reserves at least so that you have your house payments and if you get in a stuck situation you don’t lose the house, because you don’t have any backups. Whenever you move into a home, suddenly there are new expenses like, “oh no, we don’t have a garden hose or trash cans”. It’s amazing the things that come up let alone the fact that things break down and now you don’t have a landlord to call, you need to fix it yourself. I strongly encourage you to have backup cash available and sometimes that does mean putting a small down.
Fortunately loans, even though they are more stringent and a little bit harder to get into, we have more options than we did a few years ago. After the big crash, a lot of the crazy inventive creative loans went away and there were only very strict traditional loans and now we have three percent down five percent down ten percent down. There are options for you to get into a house.
If you have any further questions about mortgages or purchasing home in San Diego please give me a call my number is 619-887-6469.