Selling Your House Tuesday – How much should you put down?

I like to get pre-approved before I even start looking for a house because if/when I find the one, I want to be in a position to get it. If you find a house and make an offer without having a pre-approval someone else can swoop in and make an offer and get your house while you are stuck in limbo waiting for a decision. Not too many people are willing to wait around to see if you get approved. Try to make this process as fun and anxiety free as you possibly can and save yourself some grief, get pre-approved.

There are so many different kinds of loans these days requiring different down payments.  Twenty percent down, at the very least, is ideal. One reason is for the simple reason you have to mortgage less and will have a lower payment but another compelling reason is if you put down less than twenty percent on a mortgage you will have to pay PMI insurance(Private Mortgage Insurance). All banks put it on loans more than eighty percent. It is for their protection.   

If you are putting less than twenty percent down, watch very carefully, as you are making payments, for the equity to reach twenty percent. It will be your responsibility to go to the bank and have the PMI insurance removed. Otherwise you could be paying it throughout your entire mortgage unnecessarily.

Also, before you start making payments take your payment divided by twelve and add that much to your payment amount. That way you will be making an extra payment per year. If you do it from day one you will be so used to it you won’t even notice. I owned a home in Florida the first time I ever heard of doing this and if I had stayed in that house till I paid it off, I would have saved fifty-eight thousand dollars and paid it off eight years sooner just for paying the extra hundred and twenty dollars a month.

If you’re sitting there thinking, “I can’t afford an extra hundred and twenty dollars per month!” then maybe you want to think of buying a lower priced house because it will pay off in the long run for you. Also going with a fifteen year loan will save you a ton of money as opposed to a thirty year loan. By paying it off sooner you are paying less interest.

If you’ve bought houses before you pretty much know what you’re getting into but if you are buying your first home. Try to refrain from going to the limit on your budget. You want to be able to enjoy your home and your life at the same time and that can’t happen if you’re house poor. You can always work your way up into that dream house as you build equity and stability in your lives and jobs but if you are scratching and clawing to make your mortgage payment each month you are setting yourself up for disaster and possibly the loss of your home that you worked so hard to get.