Benefits of a 20 Percent Down Payment

While a 20 percent down payment was once the standard when purchasing real estate, it eventually fell out of favor. Because many new loans were available with minimal down payments, most homebuyers didn’t recognize a real need to save up that much. However, after the housing crisis, buyers are now reconsidering the appeal of a 20 percent down payment mortgage.

Many homebuyers can qualify for a conventional mortgage with as low as 5 percent to 10 percent down. However, if you put less than 20 percent down, you will usually have to pay for Private Mortgage Insurance (PMI). On FHA loans, mortgage insurance is required for five years. FHA borrowers are required to put down 3.5 percent, and it can’t come as a gift from the seller (but can come from family/friends). VA loans are available with no down payment and no mortgage insurance. As mentioned earlier, there are conventional loans available with 5 percent to 10 percent down payments. These loans require mortgage insurance.

Whether you should put a full 20 percent down on your mortgage is up to you and dependent upon your financial situation. With home prices still low (extremely low in some areas), and with interest rates still at historic lows, it may not make sense for you to wait to save up 20 percent.

However, if you can make a 20 percent down payment, you may be able to afford a bigger house with the same total monthly payment than you might have had if you only put down 3.5 percent, for instance. This is because a 20 percent down payment eliminates the mortgage insurance requirement. You’re likely to score a better interest rate as well. (Depending on your credit scores and other requirements, of course.)

One could also make the argument that it would be financially beneficial to have money socked away in savings in case something untoward should happen, rather than using it all on a down payment. When the money is tied up in your house, it’s not easy to access it in case of an emergency. However, a 20 percent down payment yields that much more beginning equity in your home. If you need to sell, you’ll have more room to negotiate with potential buyers.

Some lenders still offer what are known as piggyback loans. This includes the 80-10-10 loan, where your first mortgage is 80 percent of the home’s price, then your next mortgage is 10 percent (to cover part of the down payment), and the remaining 10 percent is what you put in as cash to add up to a 20 percent down payment. With an 80-10-10, you don’t have any Private Mortgage Insurance, but you do have a second loan on the house.

The bottom line: Discuss your down payment and mortgage options with your mortgage professional before you determine how much you need to save.

About the Author

Shawn Kaplan is an active, 50 state Licensed loan officer with Access National Mortgage. Email Shawn at skaplan@accessnational.com or call 615-426-3182.

Bonus: Click to get a free, no-obligation rate quote. I love to work with my readers!

Most Expensive Houses in the World - 2012

ANTILLA

Place: India

The most costly house in the world belongs to Mukesh Ambani. The house has 27 floors and has a worth of 1 billion dollars. The house consists of luxurious health club and a garage that can accommodate 150 cars.Mukesh Ambani is a powerful businessman. He has a collection of 168 cars of his own.

AARON SPELLING´S MANOR

Place: California, USA

This house is on land that spreads across 56,000 square feet. It was constructed in 1991 and has a net worth of 150 million dollars. It consists of 123 bedrooms, a round deep passage, a tennis court, an area of ice for skating, and several swimming pools.

William Randolph Hearst’s Mansion

Place: California, USA

This house was first owned by William Randolph Hearst. It has a worth of 165 million dollars and extends across 6 acres of land. It consists of 29 bedrooms, 3 swimming pools, a state of the art movie theater and a nightclub.

Hala Ranch

Place: Aspen, Colorado.

This is a cattle farmwhich is owned by Prince Bandar bin Sultan bin Abdulaziz of Saudi Arabia. It has 15 bedrooms and 27 bathrooms. It also includes indoor pool, wastage treatment plants, a tennis court, private skiing tracks, seperate building for keeping horses and a gas station.

Maison De L’Amitie

Place: Palm Beach, Florida

Maison de l’Amitie belongs to Donald Trump. It spreads across 80,000 square feet and has a worth of 125 million dollar. It includes 15 bedrooms, 8 half-baths, a greenhouse, a large room for dancing, a tennis house and a comfortable guest lodge.

Dracula’s Castle

Place: Romania

It was actually a castle which was converted into a museum in 1980s. It belongs to Archduke Dominic and has a net worth of 80 million dollars. It consists of 57 rooms, 17 bedrooms with beautiful traditional furnishings.

About the Author

Shawn Kaplan is an active, 50 state Licensed loan officer with Access National Mortgage.  He specializes in large cap and Jumbo home loan financing for the affluent and high net worth markets seeking innovative solutions.  

Email Shawn at skaplan@accessnational.com or call 615-426-3182.

You like surprises? As a Real Estate Professional...you need to know!

FHA Announces Several Underwriting Changes

FHA recently announced several changes that will impact underwriting in several areas. These changes are effective April 1, 2012.

Here's a quick summary of these changes:

For self-employed borrowers: P&L statements are now required if the last business tax return is more than 3 months old; in addition, statements must be audited if P&L income is greater than the two year average, and the higher income is needed for qualification purposes. If the two year average income is sufficient for qualification purposes, the P&L is still required, but does not need to be an audited one.

For loans with disputed accounts that receive an "Accept" by TOTAL: These are not required to be referred to a DE underwriter for review as long as the total amount of combined balances (1) does not exceed $1,000 and (2) the dates of last activity are older than 2 years. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified.

For collection accounts: If the total balances of all collection accounts are less than $1,000, the borrower is not required to pay them off as a condition of approval. If singular or combined balances total more than $1,000 they must be paid in full at or prior to closing, or provide proof of payment arrangements with 3 months of payments verified. Judgments must be paid unless payment arrangements have been made and 3 months of payments are verified.

For definitions: The following are now included in the definition of family member for the purposes of Identity of Interest transactions: Brother, Stepbrother, Sister, Stepsister, Uncle, and Aunt.

If you have any questions about these updates, and what they might mean, give me a call or send me an email and I'll be happy to discuss this or any other pertinent matters with you.

About the Author

Shawn Kaplan is an active, 50 state Licensed loan officer with Access National Mortgage. Email Shawn at skaplan@accessnational.com or call 615-426-3182.

Bonus: Click to get a free, no-obligation rate quote. I love to work with my readers!