Afonso Real Estate



Posted by Afonso Real Estate on 7/26/2017

One of the best ways to lower your monthly mortgage payment is to make a sizable down payment when you buy your new house. In fact, a significant down payment could make the difference between whether or not a bank or other mortgage lender approves you for a loan. A lot of it has to do with the past.

Time is of essence when it comes to building a mortgage down payment

Since the Great Recession, lenders have become more conservative during the loan approval process. Even if you work for a bank, you might not get approved by your employer for a mortgage. It's not just your credit rating and your salary. The amount of disposable income and down payment you have are also key.

The time that it could take you to save a mortgage down payment depend on several factors. Among these important factors are:

  • How much student loan debt you have to pay off
  • Money management habits that you have developed
  • Your income and how much job security you have (For example, did you just start your job or have you worked for your employer for five or more years?)
  • The number and amount of financial obligations you currently have
  • Location, size and amount of house you want to buy

What is a good mortgage down payment?

Even if you have been working for your employer for five or more years, don't have a lot of debt and practice healthy money management habits, it still could take you several years to save for a sizable mortgage down  payment. This is because a good mortgage down payment can start at ten thousand dollars and quickly rise. Factors that help to create a good mortgage down payment include:

  • A good down payment on a mortgage generally equals about 20% of the overall cost of the house (For example, if the house that you're buying cost $225,000, you'd put at least $22,500 toward your down payment.)
  • Rising rates could lift the amount of money that you need to put toward a down payment.
  • Your down payment is separate from other housing costs like mortgage application and homeowners association fees, title search and title application fees and closing costs.

All is right with saving for a strong mortgage down payment

You could start saving for a mortgage down payment as soon as you start working. You could also save for a mortgage down payment even if you're on the fence about buying a house. The self-discipline that you use to build the savings can help you to develop the money management skills to get out of debt, invest in your education and start building a strong retirement account.

Several years of saving for a healthy mortgage down payment helps you to develop an appreciation for your finances. It helps you to see the correlation between your hard work and how you treat the money that you work so hard for. When you get ready to buy a house, it also helps you to get a great mortgage deal, the type of deal that finds you with more money left in your wallet after you pay your monthly mortgage.