If I can put more than 20% down on a house, should I?
I want to buy a house for 575K. I can put down as much as 230K, but don't make a lot of money so I need to keep my monthly payments low. Is it better to keep some money in the bank (put down 180K and keep 50K) and pay some of the monthly payments with my savings each month? or better to put down as much as I can. Is there ever an advantage to keeping money in the bank (in addition to a small cushion savings in case I need some extra cash) instead of putting it all into the down payment? I think I will be in the house 5-6 years. If I change my mind and decide I will probably stay longer, I can always pay extra and put some of my savings towards the principle a year from now.
thanks for the answers. the more i think about the more stupid i realize this idea is. It just seems crazy to me that I make over 100k a year and still need to put 40% down to be able to afford a house that is only 1100 square feet. but that's Southern California for you. Despite the bubble collapse, home ownership is still out of reach unless you want to commute 3 hours a day.
- 1 decade ago
Well I would suggest if you need to keep the payments low then the more you put down the lower the payment.
If you put the 180 K down then you have a back up if you were to lose your job, get sick etc.
And if you invest say $25,000 of that $50,000 that is left in something SAFE then the interest off that might off set the difference in payment. If you have reason to worry at all about the payment then I would do less down and let the other money earn interest to easy the pain of the payment
- goldshire1Lv 51 decade ago
If you are going to have to tap into your saving every month to make the mortgage payment then your monthly payment is too high and you wont be approved for that mortgage amount. You might not have a choice but to put down a larger down payment (thereby getting a loan amount with payments you can qualify for) or buy a less expensive property.
- GW IILv 41 decade ago
The larger the down payment the better deal you will get. While I wouldn't recommend putting it ALL into a down payment, (you always need savings, always) putting up a large chunk would make the most sense. If you only put down a small amount that will make the loan balance larger and the interest rate higher, which of course means larger monthly payments.
- DebdebLv 71 decade ago
What do you mean by not making much money? If you're going to buy a house for $575k, and put down 20%, your payment will be $2,557 for 30 years at 5.3% (that's today's average rate). You need to be making about $70k to get that loan, with real good credit and no other debt.
Buy a cheaper house. The lender will calculate your debt ratio, and depending on your credit, allow you a maximum of 40% total debt ratio.
You need to talk to a couple lenders and get pre-approved for a loan before you try to buy a house you can't afford.
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- glennLv 71 decade ago
I think you should think very clearly about what you are doing. I would guess this is a large house with large utility bills, large property tax bill and large homeowners insurance bill. There will be a lot of up keep.
You are talking about possibly having to make part of the payment out of your savings or draining your entire savings so you can afford the payments.
I think you should buy a smaller house so you are not living so close to the edge.