As you start saving for your next home, you may find yourself wondering: how much should I have for the down payment?
While 20% is the most common number thrown out for your down payment, it really depends on the type of mortgage loan you take out. Some loans require a down payment of just 3% while the military-specific VA loan doesn’t require a down payment at all!
However, if you have the means, putting 20% down for your home is a great idea. Here are some of the biggest benefits to using a 20% down payment to buy a home in Raleigh.
It Lowers Your Monthly Payments
The larger your initial down payment, the lower your loan will have to be. This guarantees a lower monthly payment than if you were to put down less than 20%.
In addition, that means there’s less money remaining on your loan to rack up interest!
You’ll Pay Lower Interest Rates
Your bank will offer you an excellent interest rate on your mortgage loan if it feels confident that you are financially stable. Nothing demonstrates this quite like a heft initial down payment.
Say Goodbye to “Private Mortgage Insurance”
When you put down a lower payment for your home, your bank may be less confident in your ability to pay it back. In order to protect themselves, they may require you to take out Private Mortgage Insurance (PMI).
This is a policy that protects the lender in case you’re unable to pay off your loan. It is a monthly free included in your mortgage payments. Typically, PMI is required for down payments less than 20%.
Best of All, It Makes Your Offer More Competitive
Sellers are likely to be more confident in your offer when it includes a high down payment. You’ll be seen as a stronger buyer whose financing is more likely to be approved, making you stand out in the seller’s eyes.
Ready to Buy a Home in Raleigh?
Linda Craft & Team REALTORS® has your back. Give us a call today to learn more about buying a home in Raleigh, including your options for obtaining a mortgage loan.
Searching for a lender? We can help you with that, too. Check out our list of local lenders to find the mortgage lender who’s right for you.