Real Estate

  • First Time Home Buyer Tips

    I’ve been thinking a lot about the home buying process lately since I bought our home three years ago and have helped numerous family members through the process as well.

    Since buying a home is one of the largest purchases a person will even make, it is one that should be carefully planned for and free of mistakes. A mistake when buying a house can be one of your most costly mistakes ever made. Unfortunately we made many mistakes when we bought our first house but now I get to use that experience to help others avoid those mistakes.

    I’ve been learning and sharing as much as possible about the home buying process so others in the same stage of life don’t either.

    Our First Home Buying Experience

    We bought our first home in 2016 with bad credit, not a huge down payment, and not enough knowledge about the process. However we picked a great area, a beautiful house, and we love the home we are in!

    As first time home buyers we decided to jump into the real estate market before we had perfect credit. We had improved my husband’s credit by continually monitoring it for free with Credit Karma but it still hovered under 700.

    Having lower credit when we bought our first home meant we got an FHA loan in order to buy our home. This was helpful because we were able to jump into the market sooner and ride the wave of rising home prices, but it also meant we pay PMI every month until we are able to refinance.

    We made some mistakes and did some things when we bought our first home. Since then I’ve walked through the home buying process with dozens of my friends and family. I love being an advocate for first time home buyers and sharing tips on what to do and what to avoid.

    Home Buying Tips For First Time Buyers

    If you are buying your first home then there are some things you should definitely try to do in order to make the best of your experience.

    Improve your credit.

    The biggest thing you can do to improve the process is to work on improving your credit score for the year or two before buying your home.

    Having good credit will make getting a mortgage easier and less expensive because you will have access to better loan terms. It will also open up doors to certain agents who don’t want to work with clients who may not be able to secure financing due to poor credit.

    If you don’t know your score, checking your credit score is the first thing you should do (it’s free) and then you can work on improving it over time.

    Start your downpayment savings early.

    Saving up a downpayment can feel daunting if you are just starting out but it is a critical aspect of buying your first home and getting the best deal possible. The earlier you start your downpayment savings fund the easier it will be to save up a 20% downpayment.

    The more money you are able to save up the better you will look to potential sellers and lenders. Higher downpayments mean you won’t waste money on PMI and you will be better able to secure a loan with good terms.

    Learn about mortgage options.

    The world of mortgages can confuse people because there are a lot of options out there. The most common mortgage types are the following:

    • Conventional mortgages – These loans conform to standards from government-sponsored entities Fannie Mae and Freddie Mac. They generally require higher downpayments like 20% but can go as low as 3%. These loans usually require higher credit and you don’t pay PMI.
    • FHA mortgage loans – These loans are insured by the Federal Housing Administration and allow down payments as low as 3.5% and have lower credit score needs. This makes them more appealing to first time buyers but they also now usually have PMI for the life of the loan.
    • VA loans – VA loans are for veterans and are guaranteed by the Department of Veterans Affairs sometimes require no down payment at all. For disabled veterans especially these can be amazing loan options.

    Learn about mortgage loan options available to you, the terminology involved and figure out what fits your situation the best.

    Determine how much house you can afford.

    You should sit down before looking at home and determine how much house you can actually afford. You likely will get approved for much more debt than you should actually use so take the time to find out a realistic range for home purchase prices you feel comfortable with.

    To do this you can run several home affordability calculators to see what you can actually afford to spend. You can also get those average numbers and then run a couple mock budgets with the mortgage numbers included.

    Research neighborhoods.

    You likely won’t be able to buy your dream home in your dream neighborhood with your first home. That means you need to get clear about where you actually want to buy. What neighborhood is right for your first home purchase?

    Start researching neighborhoods and learn what you like and don’t like about different ones. Look at things that people don’t normally consider like your commute times to work, how busy the neighborhood is at different times of day, if the neighborhood has an active online group. Try to get a feeling for each neighborhood you are considering before looking at specific houses.

    Stick to your budget.

    You know that price range you sat down and calculated to see how much home you could afford as a first time buyer? You need to stick to that. You should only look at properties that cost less than the amount you were approved for and stay within the price range you set for yourself.

    It can be easy to get swept up in a hot real estate market where people bid against each other and your agent may even encourage you to look at more expensive homes. Resist those situations and avoid the emotional traps by setting and sticking to a strict budget.

    Don’t rush the process.

    A lot of first time buyers get caught up in the excitement of the process and the urging from family or general society over the idea that they “must buy a house” during a certain time or market.

    It’s best to ignore all this and take your time. Buy your first home when you are ready and feel prepared and confident.

    Double check all your paperwork.

    Mortgage lenders are humans and can make mistakes. As an example, we wanted to put 5% down on our house and our mortgage person repeatedly kept putting 3.5% on the paperwork. I reminded her each time to change it but she didn’t in the end and we were too scared right before closing to make a fuss. So we put down 3.5% instead of 5% which costs us money every month. Should we have checked our paperwork? Yes, it could have saved us from this earlier in the process.

    So learn from our mistake and double check because the people making your loan can easily make mistakes that cost YOU money, not them.

    Those are the best tips I have for buying your first home and now let’s talk about things you should avoid.

    Home Buying Mistakes To Avoid

    There are some common home buying mistakes that we made as a first time home buyer, but you don’t have to make those same mistakes.

    1 – Not saving up 20% down payment.

    Saving up an adequate down payment for the home you want to purchase is critical but it’s a mistake many of us make – including us!

    Saving up a 20% down payment would have saved us thousands in PMI fees and interest. It likely would save you thousands or tens of thousands of dollars in the long run as well. While saving up a 20% down payment takes more time it is worth the savings.

    2 – Not saving an emergency fund first.

    Saving up a large emergency fund on top of your down payment can seem daunting. That is a lot of money to save! Many people skip saving up enough and then move in to a new home hoping for the best.

    We made this mistake and while we got lucky, not everyone does. Sometimes people move in and immediately have emergency repairs or problems that cost thousands of dollars.

    3 – Not shopping for mortgages.

    Shopping for mortgages is another area where you can make a big mistake by not looking around for the best deal.

    You should make sure you look around for several different mortgage options and find the best deal to save you money. While you might be worried about getting qualified if you’re credit isn’t the best, mortgage companies are still working for your business. Find the best offer with interest rates or low closing fees or

    4 – Not looking at more houses.

    An easy mistake to make is falling in love with your first home. We should have looked at more houses during our search even if it just confirmed the first one was the right one. Make sure you explore multiple homes and neighborhoods in your search for the right house!

    We love our house but we made several big mistakes when we bought it. Today I’m sharing the 4 mistakes we made buying our first house so hopefully you can avoid these common first time home buyer mistakes and have a very smooth process!

    Buying your first home can be a very nerve wracking process but it also can be one of the best financial moves of your life! I’m happy to be sharing my experience buying a house for the first time to help others!

    5 – Not budgeting for closing costs.

    Closing costs are something first time home buyers forget about budgeting for because it’s not a well covered topic. I shared our closing costs in my video about how much our first home cost because it helps people to see real life examples.

    Generally closing costs will run between 2% and 5% of your loan amount depending on who you use as a mortgage lender. You can shop around and compare prices for certain closing expenses like homeowners insurance, home inspections and title searches, which will lower the amount you must pay at closing. You can negotiate to have the seller cover your closing costs as well.

    Those are some of the most common issues that we encountered and have seen others make as well.

    Saving Up Your Down Payment

    One thing that is super important is the down payment. Below are the things you might want to consider when deciding how much to save up for a house.

    What will you have to pay for when buying a home? 

    There are a lot of expenses that come with buying a house, including a lot of unexpected expenses. All of the expenses associated with buying a home should be considered and budgeting for when decided what amount of house you can afford. Being prepared for all these expenses will make the process a lot easier.

    For example, you’ll have to pay for all of these items:

    • House price – The price of the home you purchase is the largest expense and the first one you should consider. Make sure you think about the interest rate on your mortgage in this number too because it’s not just the initial price that you will be paying.
    • Property taxes – Depending on where you live your property taxes could be rather high. Before offering to buy a house check on the property taxes for that specific house. You might pay $2,400 a year more for a house located in a city while a house 5 minutes down the road costs less in property taxes each year just where it is located. This is definitely a budget item to consider.
    • Home insurance – You will have to properly insure your home against the unthinkable. Make sure your home is covered for any additional needed insurance above the basics to cover things like earthquakes and flooding.
    • Utility bills – This can be hard to gauge before buying a home but it’s a good idea to get a general sense of how much it will cost you each month for utilities in a home. You can call your local utility provider and ask for the average bill over the last 12 months for the address. I do this every time I move because it helps to know what I’ll have to spend to get basic services.
    • And more – This list could go on and on! when closing there are inspection and closing fees. When moving in there are moving expenses and new furniture purchases. Then there are home repairs and yard maintenance and so on. There are a lot of things to consider so sitting down and writing everything out will help you consider what you will have to spend.

    Make sure you remember all the extra things that cost money when buying a house.

    How much money should I spend on a house?

    It’s a hard question to answer for someone else. It depends on a lot of personal factors like the area you live in and your income levels.

    Generally people are told to take out a home loan that is around 25% to 30% of their after-tax take home income. Spending a third of your income on housing is an acceptable amount that is widely encouraged by financial advisors.

    In my city there are lots of adorable homes in the range of $90,000 – $110,000. Based on two incomes I will probably end up purchasing a home somewhere in that range. Since it’s a ways off there is still a lot of time before deciding on the exact number to spend on a house. I will definitely have a more exact and very strict budget before actually buying a house. It helps to have a budget for home spending before even looking at houses.

    I’d also suggest spending way less than you are approved for when buying a house. The last house I planned to buy was roughly half the price I was approved for and I thought that was a very reasonable and cute house. You don’t have to max out your budget and spending capability when buying a home! Do what feels right and give yourself some spending breathing room.

    How much should I save up for a down payment?

    Currently I’m working on saving up for a house down payment. It’s a small fund currently and grows just a tiny bit each month. This is going to be my number one goal and I plan to stash away as much as possible in this account.

    Depending on the lender, and the state of the economy, you can put down as little as 2.5% on a home, or you can be asked to put down 20% to 30% of the purchase price.

    How much money you put down on a house will depend on what you lender requires and how much you can afford.

    The standard minimum is usually 20% and this will prevent you from paying PMI, private mortgage insurance. Adding that expenses can make a home unaffordable so it’s often best to avoid it.

    Most financial experts recommend that you save up enough to put 20% down on a house. People like Dave Ramsey urge you to do this but also make concessions for first time home buyers and concede that it’s easier sometimes to only save up 10% of the purchase price.

    But the golden standard is definitely a 20% down payment!

    If you plan to purchase a home for a price of $100,000 then the down payment you will want to put down is $20,000. You can scale up from there to the house price in your area.

    Paying Off Your Home

    Once you have a mortgage you may want to pay it off faster. Many people love the feeling of being completely debt free, mortgage and all.

    Paying off your mortgage faster can be a very simple process that will hardly even affect your budget at all. Follow these two simple ways to pay off your mortgage in order to pay off your first home.

  • Buying Our First House – Price & Mortgage Details

    If you are nosy about real estate like me, or want to buy a house and are curious about getting a mortage, then this video today is for you!

    In this video I discuss all the details of our mortgage. I share our much house cost, the amount we paid for PMI, the fees we paid for closing, and all the nitty gritty details. All the details of our experience with getting a mortgage and closing on our first home so you can learn what to expect as a first time home buyer.

    It’s fun getting nosy in someone else’s money, isn’t it?

    Buying Our First Home

    We bought our first home two months before our wedding. We knew we wanted to start off together in a home and found a house we loved the first day we looked at houses.

    Since the market was already hot in our area, houses were flying off the market. Several we looked at in the morning had offers by the afternoon.

    We also put an offer on a house that first day! After some back and forth with the seller we settled on a purchase price. We were both thrilled and terrified that we didn’t look at that many houses. It was one of the first five houses we saw and we knew as soon as we looked that we could live there happily.

    What We Did Wrong Buying Our House

    Most financial experts recommend putting 20% down on a home but we definitely did not do that. At the time we were paying for a wedding and had other expenses so we went with a FHA loan and a 3.5% down payment. I knew I should have saved up more for the house, but ultimately did not want to wait a year or more to get the full down payment.

    Speaking of down payments, I actually wanted to put 5% down but our mortgage lender messed up the paperwork and only did 3.5%. I was too nervous by the time we got our final documents to try correcting it again because I was worried something would cause it to not work out. In retrospect that was incredibly silly and I should have stood my ground over her mistake, but after experiencing a failed house purchase I was too nervous.

    Obviously I did not like our mortgage lender after she messed up our down payment. We should have shopped around more and found more options for lending. While we got a good rate, I did not have a positive experience and it is possible another lender would have been better.

    We also made several other mistakes with our home buying process that I detail in the video below.

    I’m happy to be sharing my experience buying a house for the first time to help others, both good and bad! There are four mistakes we made during the home buying process as first time home buyers.

    What We Did Right Buying Our House

    We worked with a realtor we trusted. This makes a huge difference when you are a first time home buyer. When you know your realtor won’t push you in the wrong direction just to make a sale then you can relax and enjoy the home buying process even if you don’t understand everything that is happening.

    Our interest rate is also quite good! 3.65% interest on a mortgage loan is a great rate even if it wasn’t the absolute bottom rate. Two years later rates have gone up a full percent (or more) and it’s not worth it for us to refinance even to get rid of our PMI.

    We bought in a great neighborhood. At the time we bought houses were under $100 per sq ft and now you can’t hardly find that in one that hasn’t been remodeled. Houses are going for much higher amounts and we’ve gained $30,000 in equity at least since buying. We are in one of the countries hottest neighborhoods and that is great news for us as homeowners.

    Our house is the perfect starter home for us. It’s in a great neighborhood, we have plenty of space to grow into, but not too much space that it is overwhelming. We have a huge backyard which is great for our dogs. We have an active neighborhood association and our street has fantastic neighbors.

    Overall we are thrilled with the house that we chose and love where we live. We are also working to pay off our home early!

    We use 2 easy strategies to speed up our mortgage payoff every month. You can see how we are doing this in the video above where I also share our exact mortgage statement. You can see where the payment is going and how it is allocated each month and see our mortgage statement breakdown here.

  • 2 Easy Ways To Pay Off A Mortgage Faster

    Paying off your mortgage faster doesn’t have to include crazy schemes or huge extra payments. In fact, it can be very simple.

    We are paying off our mortgage faster and saving thousands in interest by using two simple techniques.

    Today I’m breaking down our monthly mortgage statement to show you how much we pay per month toward our mortgage, how much we’ve paid off in the first three years of owning our home, and the 2 ways we speed up our mortgage payoff every month.

    A monthly mortgage statement provides essential information about your monthly payments and your mortgage balance. It’s the key to seeing your mortgage payoff progress.

    If you aren’t taking the time to open up your statement each month and see where the money is going, you should do that this month! Take a look at where your money is allocated and see how much is actually going toward your mortgage balance principal. If you bought your house recently then it probably isn’t much!

    Our Monthly Mortgage Statement

    In the video above I break down what exactly we pay each month toward our mortgage according to our mortgage statement.

    Our monthly payment is $1,128.36 which is broken down as:

    • Principal – $273.96
    • Interest – $426.52
    • Escrow – $427.88

    Because we round up to $1,200 for our monthly payment, we also send $71.64 to principal payments each month. This is one of the ways we are paying off our mortgage faster.

    That means each currently $273.96 + $71.64 for a total of $345.60 goes towards our mortgage principal each month.

    Escrow is the part of the mortgage payment that handles paying for mortgage-related items. These expenses are necessary with a mortgage and include things like property taxes and homeowners insurance. These things are only usually due once a year but most mortgage companies require you pay monthly installments to make the large yearly payment. It’s like a sinking fund that the mortgage holds for you in an escrow account. The mortgage lender makes sure these expenses are paid by paying them our of your escrow funds.

    2 Ways To Pay Off The Mortgage Faster

    We’re paying off our mortgage with zero extra effort or pain thanks to a couple small decisions.

    1. Rounding up our payment.

    Our mortgage payment is $1,128 a month but we made the decision to round up to $1,200 for our payment. This means each month roughly $71 is going directly to pay down the principal of the mortgage. Rounding up doesn’t hurt our budget overall but it guarantees each month we are sending extra money to pay off our mortgage.

    That doesn’t sound like much when we are throwing $71 a month at a $141,000 debt. but when you multiple that $71 by 12 months, we send $852 a year to the principal of the mortgage. That will definitely speed up the payoff process!

    Rounding up your mortgage payment to the nearest $100 dollar amount makes it an easy and painless way to quickly pay off your mortgage faster.

    2. Biweekly mortgage payments.

    We’ve set up our mortgage with biweekly payments to pay off our mortgage faster. This pays off the mortgage faster because you are actually making 26 payments a year but you only need to make 24 to cover the 12 months of mortgage payments. That means the extra 2 biweekly payments are applied to the principal as one FULL PAYMENT extra per year.

    On our biweekly schedule we have a “half payment” of $600 go fully toward principal around May and then again later in the year. This adds up to one full payment going straight to paying the mortgage down faster.

    Most mortgage servicing companies allow you to set up a biweekly payment plan where you have an extra payment per year which drastically speeds up your repayment of your mortgage.

    Those are a couple of the ways we are paying off our mortgage faster and how much we’ve paid so far!

    How Much We’ve Paid Off In 3 Years

    In the roughly 3 years since we bought our house we’ve made a lot of payments, but have we made any progress paying down our mortgage?

    Mortgages are set up so you pay more interest in the beginning so a large chunk of each mortgage payment goes toward interest. Despite this we have managed to pay off thousands from our mortgage so far.

    • Home purchase price:  $158,900.00
    • Mortgage start:  $153,596.00
    • Mortgage current:  $141,194.46
    • Mortgaged reduced:  $12,401.54

    In the video below you can see how we’ve paid off more toward our mortgage by the mortgage payoff strategies.

    Paying off a little bit extra each month moves us much further down the schedule of debt to pay. By utilizing these small mortgage payoff strategies we are drastically speeding up our mortgage payoff without feeling any pain!

    We made a few mistakes buying our first home so we are making up for it by easily paying off our house faster.

    Should You Pay Off Your Mortgage Faster?

    Depending on which financial advisor you ask, paying off your mortgage is a good idea or a bad idea. Arguments can be made for both options.

    In reality it depends on your financial goals and your risk tolerance level. Many people find that paying off the mortgage brings a huge amount of relief and peace of mind when you don’t have a monthly mortgage payment. The security of owning a home outright can be a huge positive for many people.

    Paying off your mortgage also saves you money. You’ll save a ton in interest even with a small interest rate because the faster you pay off your mortgage the less interest you will pay on the loan.

    Having your mortgage paid off also gives you more options. You’ll have extra money each month that you could use to save toward retirement or go on vacations or build wealth and achieve financial independence! Paying off your mortgage early is an amazing way to build your wealth and gain financial independence.

    In the end, paying off your mortgage gives you more options and more freedom. Who doesn’t want that?

  • 4 First Time Home Buyer Mistakes We Made

    We love our house but we made several big mistakes when we bought it. As first time home buyers we thought we were prepared but we unfortunately still made several mistakes.

    Today I’m sharing those 4 mistakes we made buying our first house so that you can avoid these common first time home buyer mistakes. Hopefully our home buying mistakes will lead you to have a very smooth experience!

    Buying your first home can be a very nerve wracking process but it also can be one of the best financial moves of your life! Home ownership catapults many to financial security and can set up lasting wealth for generations. Buying a home is one of the biggest and most lasting financial decisions you’ll make. It’s best to avoid mistakes!

    I’m happy to be sharing my experience buying a house for the first time to help others, both good and bad! These are the four mistakes we made during the home buying process as first time home buyers.

    Did not save up 20% down.

    One mistake we made buying our first house was not saving up 20% of the down payment. For our first home we only saved up 5% instead of doing a “full downpayment” of 20%.

    While many financial gurus don’t yell at first time home buyers for not saving up 20% on their first house, it is a great idea to aim for that larger down payment. If you can save up 20% or more for a downpayment then you should do so. It reduces the amount you owe overall, lowers your monthly payment, and prevents you from paying PMI each month.

    If you go with less than 20% down you will have to pay PMI (private mortgage insurance) each month. This does nothing for you and only protects the lender so it’s something you want to avoid if you can.

    Saving up a large down payment can be difficult when you don’t have a lot of extra income, but there are multiple benefits to increasing your down payment: you will pay off the home faster, you’ll save money not paying PMI, you are actually more likely to get a mortgage, you’ll have smaller monthly payments, and you are a more competitive buyer too.

    There are very few downsides to saving up a full 20% down payment!

    Did not have a full emergency fund.

    One mistake we made when buying our first house was not having a fully funded emergency fund in case something happened. This was incredibly risky and we could have ended up in a huge amount of debt when something broke or an accident occurred. We took a gamble that I wouldn’t recommend – it could have ended very poorly.

    When you buy a house it is guaranteed that something will break eventually. You need an emergency fund for when that situation arises to lower the risk face financially. We luckily avoided anything major early on but not everyone is that lucky.

    Some people drain their emergency funds to make the down payment on a home but this can be the absolute biggest mistake you can make. It leaves you incredibly vulnerable to emergencies and also unable to handle the maintenance costs that come with owning a home each year.

    Did not shop around for mortgage providers.

    When we bought out first house we were too nervous about the process to shop around for mortgages once we were pre-approved with one company. This was a huge mistake. We could have found a much better provider and deal with our loan.

    Unfortunately not shopping around meant we went with the first mortgage provider our real estate agent recommended and they were not the best fit for us. Ultimately this was probably due to the fact that the first time I tried buying a house it didn’t work out. The fear that it wouldn’t work out again made me play it so safe that we didn’t shop around which was a mistake.

    Shopping around for mortgages is a great idea when you are buying your first house because it allows you to get the best mortgage loan and rate. now that I’m past that initial fear I realize how important it is to shop around!

    Don’t let the process intimidate you. You can work with a mortgage broker or research mortgage options on your own to find the best rate and service. There are tons of online resources that make it incredibly easy to shop for and compare different mortgages.

    Did not look at enough houses.

    One mistake we made in our home buying search was not looking at enough houses. On our first day of searching for houses we looked at 5 houses and ended up buying one of those 5! While we love our house, we should have toured more houses in person to get a better idea of floor plans and different amenities homes offered.

    The reason this was a mistake is because we got the typical “house buying fever” many first time home buyers get. We saw a home we loved and we knew the hot market meant many homes were snatched up so we went with that first house very quickly!

    It is easy to forget there are many more houses and there is no reason you can’t find another house you love if one doesn’t work out. Look at houses online and in person, go to open houses, get a good idea of what is out there in your market!

    First Time Home Buying Mistakes

    We love our house but we did make some mistakes during the process!

    Luckily those mistakes educated me on what not to do when buying a hosue so others won’t make the same mistakes – and we won’t make them again.

    If you’re buying your first home check out some of my other posts about the home buying process! The more you can learn about buying a home the better you will do during the process.

    Here are some of the more helpful and popular home buying series posts:

    Remember also that a house can be a wonderful addition to your life but it’s not the end all be all. Homes are sold every day, people move all the time, accidents occur, and plans change. Your first home will likely not be your last home. Try to keep this in mind and be smart about buying your first house!

  • Are Low Down Payment Mortgages Worth It?

    When we purchased our first home we went with an FHA mortgage loan that allowed us to put down just 3.5% of the home price. This low down payment mortgage option allowed us to buy our first home without saving up much money, but was it worth it?

    Today I’m looking over the pros and cons of choosing a mortgage that allows a low downpayment option. Determining the right mortgage for your situation should be down with a professional and a lot of personal research.

    What are low down payment mortgage loans?

    A low downpayment or low deposit mortgage is a type of mortgage that requires you to pay a very small amount of money into the loan initially. These are often used by first time home buyers who are unable to save up the full recommended 20% down payment. Certain loans allow you to purchase a home with less than 20% down and even as low as 3.5% down.

    With conventional mortgage loans you can generally go as low as 10% down or occasionally some even allow 5% down payments. Traditional financing may require you to pay 20 percent or more as the down payment depending on the market you are in and your credit score.

    Depending on your market and the economy you may or may not be able to use a low down payment mortgage loan to purchase a home. After recessions these loans are harder to secure, but if you are a first time home buyer they can help you achieve home ownership more quickly so your money is going toward equity rather than rent.

    If you are considering a low deposit mortgage then you need to consider the pros and cons associated with this type of mortgage. Depending on your situation and long term plans a low down payment mortgage could be a useful tool or one of the common first time home buyer mistakes.

    you may only need to pay five percent of the sales price or less as your deposit. Traditional financing may require you to pay 20 percent or more as the down payment. While the availability of low deposit mortgages has been constrained for the past few years, things are starting to improve. When you are thinking about whether you want to pursue a low deposit mortgage for your real estate buying plans or not, consider a few pros and cons associated with these mortgages.

    Pro: Getting Into Properties Faster

    The number one pro of a low down payment is that you are able to purchase a property faster. This is especially useful when you do not own any properties at all and are purchasing your first residence.

    The existence of low down payment mortgages is there to help out first time home buyers and it’s one of the many ways that first time buyers are able make their first home purchase. You’ll notice that mortgages for rental properties are not generally eligible for low down payment loans and usually requires a higher down payment.

    Low downpayment mortgage options let people get into a property faster because they don’t have to wait the extra months or years in order to save up a full 20% down payment. For some markets being able to use a smaller down payment then you could get into a property years faster.

    Pro: Increased Availability of Assets

    One important consideration is the availability of assets. One of the main differences between low deposit mortgages and a traditional mortgage can seem useful to some home buyers: you have more money in your bank account.

    If the deposit on a traditional mortgage may empty out your bank account entirely, then a low deposit mortgage may be a better option for you. Having more money in the bank after your home purchase

    Homeownership has many expenses associated with it, such as the need to purchase new furnishings for the home, unexpected repair costs, regular maintenance costs, increased utility bills if you are buying a larger home and more. Many homeowners will enjoy greater financial security over the long run if they keep some of their financial assets liquid and easily accessible in a bank account. When an emergency comes along you are going to appreciate having a larger emergency fund.

    Con: The Interest Rate

    One of the most significant drawbacks associated with applying for a low downpayment mortgage relates to the interest rate of the loan.

    Unfortunately lower down payment loans often come with higher interest rates. When you shop around today and compare different loans, you may notice that the interest rate on low deposit mortgages is considerably higher than the rate on mortgages with a more traditional or higher deposit requirement.

    The interest rate on your mortgage can ultimately affect your monthly payment as well as your ability to repay the outstanding balance. The higher your interest rate the more you will pay for your house in the long run.

    Con: Higher Monthly Payment

    When you are trying to decide what type of mortgage to get, you need to consider the fact that the low downpayment mortgage generally will have a higher monthly payment. This higher amount of monthly spending will need to be factored into your decision.

    With a lower down payment, the monthly payment for your mortgage will be higher because it is based on the total amount borrowed, the interest rate and the loan term. Both the total amount borrowed and the interest rate are generally higher with the low downpayment option, and because of this, the monthly payment may be significantly higher.

    While it may be easier to afford a low deposit mortgage’s deposit requirement initially, you should consider how the higher monthly payments will affect your budget for years to come. You’ll want to run a new budget based on different monthly mortgage payments and see which will work best for your life.

    Is A Low Downpayment Mortgage Right For You?

    If you have been thinking about applying for a mortgage and are debating between a low down payment mortgage and a mortgage with a higher deposit requirement, each of these points should be considered carefully. Depending on your financial situation, you may find that one option is more suitable for your needs than others.

    The real question you need to ask after considering the pros and cons: is a low down payment mortgage the right choice for you? Only you can answer that question because it will depend on your personal situation, income, and risk tolerance.

    If you are interested in this approach then you should definitely do your research and run the numbers first. It’s a path that can pay off but is financially risky!