When preparing for home ownership, put down as much cash as you possibly can for your downpayment. The larger your downpayment, the lower your monthly payments.
A large downpayment gives you many benefits:
- You may qualify for a better mortgage loan.
- It puts your offer in a more competitive light for the seller to accept your offer.
- Your monthly mortgage payment will be lower.
- It may eliminate the need for PMI.
- You earn more equity starting from the close of escrow.
- It improves your credit score due to lower LTV ratio.
- You are committed to your home because your vested interest is larger.
Your next question probably is – where do you get the money for your down payment? First of all, you do NOT want to borrow money for your down payment. Whether it’s a loan from family or it’s against your retirement account, it would be poor money management to have additional debt ON TOP of your mortgage loan. That’s the quickest way to get deep in debt, shortly after close of escrow.
Read more in our book, "Buy Your First Home", http://tinyurl.com/dy2wjx4.
