When Buying a Home, a Large Down Payment Can do Wonders

One of the major reasons you want to put down as much as possible when purchasing a home is because you will save you a ton of money in the long run.  Much like buying a car, the more money you put down the lower all of your costs are going to be.  To qualify for a conventional mortgage you will need to put down 20% of the said purchase or the estimated value that was assessed by a home estimate professional.

Many houses cost over $100,000 but for the lack of argument let’s use that $100,000 as an example.  If you were to get a conventional mortgage you would need to plunk down $20,000.  The truth of the matter is that there are not a lot of people that have this kind of money to spend on anything.  Yes some do, but for a person looking to buy a $100,000 house is more than likely not going to have this kind of money.  This is where someone would get a high-ratio mortgage. 

A high ratio mortgage will require you to obtain default insurance (more money) and you will get a fixed interest rate varying between 3-5 percent.  This will make for extremely large monthly payments and have you paying thousands more than the house is actually worth.  However, this is what most people are reduced to because after a while of renting you get sick of being in a money-pit that just sees thousands of dollars going nowhere.

This is why no matter kind of mortgage you qualify for, the more you put down the better.  If you are able to put down a large down payment you will not only cut down the amount of money in the loan but create smaller payments throughout the life of the loan.  If you have a high interest rate most of the money you are putting into the monthly payment is nothing more than the interest rate itself.  Knocking down the amount of interest you pay each month means that more of your money is going to pay off the actual house, not the interest on the loan to get the house.