First loan to buy a houseOf people have aCommon mistakes.

Thought the down payment must reach 20%.

in fact,It is also feasible to buy a house with a down payment of less than 20%, You can even buy a house with a 5% down payment. According to the National Association of Realtors survey report, in December 2019, 12% of people had a down payment of less than 76%!

Let us first talk about the advantages and disadvantages of the down payment.

  High down payment vs low down payment  

   20% and above down payment 

With sufficient funds, submitting a down payment of more than 20% meansIf the loan amount is small, the monthly payment pressure will be much smaller in the future.

At the same time, for some lending institutions, lenders with a high down payment pose less risk.So it’s easy to get approval and the interest rate will be lower.However, for a down payment of more than 30%, the bank believes that the risk of these lenders is small enough, so the interest rate will usually not change.

Of course, the disadvantage of a high down payment is that it is more pressure to save money to buy a house.Coupled with the fact that housing prices are rising more and more fiercely, it is more difficult to get a high down payment.

Down payment below 20%

For low down payment, the first isEveryone’s pressure to buy a house will decrease.

At the same time, in today's real estate market, most loan projects allow a lower down payment, so the choice of space is relatively large.

The disadvantage of a low down payment isPay for Private Mortgage Insurance (PMI)That is personal loan insurance.Because the 20% down payment is the demarcation line for exemption of insurance, buyers with no down payment or low down payment loans will be required to buy this insurance unless there are special exceptions.

In other words, if you are willing to buy PMI, you can pay a down payment of less than 20%. PMI is basically 0.3%-1.2% of the loan amount, and the specific value is determined by your down payment and credit score.

Taking 0.55% as an example, you can refer to the figure below to see the monthly PMI prices for different types of houses:

According to the loaner's repayment situation,ThisMortgage insurance can be cancelled.The faster house prices rise and the higher the value of the house, the faster the insurance may be cancelled.Some buyers used a 5% down payment loan and only paid less than 4 years of PMI to meet the conditions for cancellation of insurance.

 Is it suitable for low down payment?

Is it cost-effective to pay an additional insurance each month?According to the rising trend of housing prices and our own conditions, we help everyoneIt is concluded that in three cases, it is more reasonable to exchange insurance for a lower down payment.

Urgency of buying a house

If it is really difficult to save enough down payment, especially when housing prices have been rising and buying a house is just in demand, using PMI can help you enter the door of your new home as soon as possible.Once the house is in hand, renting, tax relief, etc. can bring economic benefits.If you miss the opportunity to buy a house in order to avoid loan insurance, the gain may not be worth the loss.

Preliminary capital flow

If you want to save money for decoration and other larger household expenses, a lower down payment is a good choice.Especially if the house you bought needs some small repairs or modifications, it is even more necessary to keep some money on hand to ensure the liquidity of funds.

Better loan terms

There is another secret of low down payment:Due to the cost factor of the lender, you may get a better mortgage term (loan terms).

When a buyer applies for a loan from a lending institution, the lending institution will bear a certain amount of loan cost for each loan.These costs may be transferred to the buyer, that is, the lender, through higher interest rates and transfer fees.

Recently, information from Fannie Mae and Freddie Mac, the two largest mortgage agencies in the United States, stated that when the down payment is 20-25%, the cost of lending may be higher than that of a low down payment loan of <20%.

in other words,For lenders with a down payment of less than 20%, the cost of the lender may be lower, and the interest and transfer fees charged to the lender may be lower.

In short, for everyone to buy a house with a down payment of less than 20%, the interest may be lower, the disposable funds are sufficient, the saving cycle is short, and the quality of life is guaranteed.So if you want to buy a house, you don't have to be discouraged because you haven't saved enough 20% down payment.

Generally speaking, there are several key points for buying a house in the United States:Determine the down payment loan, check the house offer, and transfer the property right.

Of course, you never want to miss it 

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FlyhomesIt is a technology real estate company, founded in Seattle in 2015, dedicated to revolutionizing the US real estate industry with the power of technology and finance, and providing buyers and sellers with professional and efficient housing transaction intermediary services.Currently operating simultaneously in Boston, Southern California, Seattle, California Bay Area and Portland.

At present, Flyhomes has helped nearly 2200 customers buy and sell houses, with a total transaction volume of more than 20 billion US dollars.

In order to innovate the house transaction process and help everyone to buy the house you like more smoothly and easily, we use the power of technology and finance to launch a brand-new [financial product] and [service model]. 

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Do your best and strive for perfection, just to give you the best house buying experience! 

This article is provided by Flyhomes

Edit | Wild Rui

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