Even people who don't know much about mortgages know the rule of thumb that you should expect to put down 20% of the cost of the home. It begs the question, though, of whether that is a hard-and-fast rule or if there is some wiggle room.
If you're looking to get into a home, it makes sense to do your research so that you can be prepared to make the best moves to secure your financial future.
Here is a basic explanation of how to do just that.
Different Lenders
One thing to consider when it comes to home loans is that different lenders offer different mortgage products. While any lender can offer you a product that requires a 20% down payment, some lenders are willing to get especially creative to work with your financial situation.
Digging further into this, the lender you choose could have a major impact on whether or not you're approved for a particular loan. Therefore, if you have time, it might suit you to shop lenders before you commit.
Different Loans
The good news for aspiring homeowners is that there are a variety of mortgage products available that don't require a 20% down payment.
Many of these home loans are readily available to individuals who meet certain criteria. For example, if you have served in the military, you may be eligible for exclusive mortgage products offering competitive interest rates and low down payments.
First-time homebuyers also can often find unique loan products that require less than 20% down.
Paying More
Just because 20% is the recommended down payment for many types of loans doesn't mean that you can't put down more. In fact, if you are able to put a larger down payment on your home, you'll likely lower your monthly payments over the life of the mortgage.
In many cases, you'll also be able to reduce your interest rate, saving you even more money and helping you get out of debt sooner.
Interest Rates
Buying a home right now is a great choice because interest rates are at historically low levels. It's important to keep in mind, though, that opting for a lower down payment may increase your interest rate, at least slightly.
Of course, this largely depends on the types of mortgages you qualify for and your personal financial history. Don't let slightly higher interest rates stop you from pursuing the dream of owning a home if you're otherwise able to afford the mortgage payments.
Don't Get Ahead of Yourself
With all of the talk about the hot housing market, it can be easy to think that you need to get into a house as quickly as possible. Before you go down that road, though, it's important to first assess your current financial standing.
Taking stock of your budget will ensure that you don't run into any speed bumps down the road. This will help make the gift of owning a home even sweeter.
