Low Down Payment Options

There are costs and benefits to any option, including those with low down payments. You should carefully consider your options and discuss your plan with a professional.

Talk to one of our loan specialists today to come up with a customized solution that best fits your needs and budget.

Low or no down payment programs have two primary costs that result in a higher monthly payment:

• Higher interest rates
• Higher mortgage insurance premiums.

Mortgage insurance can be removed once sufficient equity is produced. For example, if the property shows at least 20% equity in a few years, the mortgage insurance can be refinanced away.

Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.

The chief benefits of lower down payment include the following:

• Less money out of pocket at the time of purchase.
• Higher rate of return. Your property’s appreciation will be the same whether you put 3%, 5%, or 20% down. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.
• Opportunity cost. In some cases, the smart investor can make more money from available cash by placing it in other investments.

During the first few years of the mortgage loan, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.

Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.

Talk to your loan officer at Brothers Financial about the best situation for you.