How Much Money to Put Down? Tim McLaughlin Getting a low down payment mortgage can provide you with a means to purchase a home without coming up with a large amount of money upfront. While this type of mortgage can be beneficial, there are a few potential drawbacks that you will need to know about to analyze if putting more money down is right for you. Here are a few things to consider about low down payment mortgages.

1. Weichert Financial Services
Market Monitor
Issu e 1 1 , V ol u m e 27 / Ju l y 9 , 2 0 1 0
How Much Money to Put Down? The Week Ahead -> The “Keys” -
Tim McLaughlin Inflation Data (if existent) dictates the week
Getting a low down payment mortgage can provide you with a
means to purchase a home without coming up with a large amount of Date Economic Release Prediction Last
money upfront. While this type of mortgage can be beneficial, there
are a few potential drawbacks that you will need to know about to
analyze if putting more money down is right for you. Here are a few 7/13 IBD/TIPP Eco Optimism - 46.2
things to consider about low down payment mortgages.
7/13 Monthly Budget Statement -$75.0B -$135.9B
Low Down Payment
With a standard mortgage without mortgage insurance, you are 7/13 ABC Consumer Confidence - -42
going to have to come up with at least 20% of the purchase price out
7/14 Bloomberg Global Confidence - 36.63
of your pocket. This can be a very significant investment for first time
homebuyers or when you get into more expensive homes. When you
7/14 MBA Mortgage Applications - 6.7%
opt to go with a low down payment mortgage, you will be able to
invest a lot less of your own money. For example, with an FHA loan,
7/14 Import Price Index (MoM) -0.2% -0.6%
you can put down as little as 3.5% of the purchase price.
Keep Reserves 7/14 Import Price Index (YoY) - 8.6%
The biggest benefit of getting this type of mortgage is that you are
7/14 Advance Retail Sales -0.1% -1.2%
going to be able to hold onto your cash reserves. When you put a
substantial amount of money down, this is going to cut into the
7/14 less Autos 0.0% -1.1%
amount of savings that you have. Being able to have a large amount
of money in savings is going to be beneficial in a number of different
7/14 Business Inventories 0.5% 0.4%
ways. You will have capital available to invest, to furnish your home,
for emergencies, and with higher reserves, that will also help in the
7/14 FOMC Meeting Minutes - -
qualification process.
Private Mortgage Insurance 7/15 PPI (MoM) -0.1% -0.3%
One of the drawbacks of getting a low down payment mortgage is
7/15 ex Food/Energy 0.1% 0.2%
that you are going to have to obtain private mortgage insurance.
Private mortgage insurance is a type of insurance that you must pay
7/15 PPI (YoY) 3.2% 5.3%
in lieu of putting 20% down. The investor is going to require this in
order to insure themselves against the possibility of you defaulting on
7/15 ex Food/Energy 1.1% 1.3%
the mortgage. If you default on the mortgage, the private mortgage
insurance company is going to pay the lender a part of the balance
7/15 Initial Jobless Claims - -
that is owed. Private mortgage insurance is going to add money to
your monthly payment, however, once your loan to value reduces to 7/15 Continuing Claims - -
77.5%, via appreciation or via principal reduction, the mortgage
insurance may be removed. 7/15 Industrial Production 0.0% 1.3%
Interest Rate
7/15 Capacity Utilization 74.2% 74.1%
Something else that you will want to take into consideration is the
interest rate. Many times, lenders are going to give you a lower 7/15 Philly Fed Survey 10.0 8.0
interest rate when you make a larger down payment. Therefore, you
are going to have to decide whether putting a small amount of money 7/16 CPI (MoM) 0.0% -0.2%
down is going to be in your best interest in the long run. If your
interest rate is higher, your monthly payment may increase. 7/16 ex Food/Energy 0.1% 0.1%
Making the Decision
7/16 CPI (YoY) 1.2% 2.0%
If you can get a low interest rate and the private mortgage
insurance is not too unbearable for you, getting a low down payment 7/16 ex Food/Energy 0.9% 0.9%
mortgage can be beneficial. Just make sure that you are not going to
be paying too much money overall so you can avoid paying extra 7/16 U of Michigan Confidence 75.0 76.0
upfront. Need help analyzing? Ask us how!
Weichert Gold Services. Real Estate, Mortgage, Insurance, Title, Home Connections. We Do It All For You.
At the date of this printing all information is deemed reliable but not guaranteed. This publication is a service to our clients and friends. It is designed only to give general information on the topics
actually covered. It is not intended to replace tax, legal or financial advice, for which you are encouraged to seek a competent professional advisor. Weichert Financial Services Executive Offices:
225 Littleton Road, Morris Plains, NJ 07950. 1-800-829-CASH. An Affiliate of Weichert, Realtors®. Licensed Mortgage Banker with State Department of Banking: NJ, NY, CT, and PA. Licensed
Lender: DE, MD, VA, DC, AK, TX, and WV. An Equal Housing Lender.