Determining the right down payment to put down is tricky. If you put down too little (say an FHA loan’s minimum of 3.5 percent), then you’ll get stuck paying for private mortgage insurance, which can be as high a 1 percent of the loan amount annually. On conventional loans, you can cancel mortgage insurance once you reach 20 percent equity in the property, but with FHA loans, you can’t. You’re stuck with the extra cost until you sell the home or refinance your mortgage.
On the other end of the spectrum, you can also pay too much. Though putting 20 percent down can help you avoid mortgage insurance, if it makes you completely cash-poor and depletes your savings, it might not be the best financial decision. Homeowners need a solid rainy day fund in case of unexpected repairs, maintenance or other costs.
The information contained on this website is for informational purposes only and is not an advertisement for products . The views and opinions expressed herein are those of the author and do not reflect the policy or position of Brokerage. Source: The Mortgage Reports