5 Common Down Payment Mistakes

When you are shopping for a home in Miami or anywhere throughout the state of Florida, one of the top things you will need to think about is how you will make your down payment on your new property.

We see borrowers make mistakes largely due to not understanding their options with respect to down payments or how their down payments will affect them over the lifetimes of their loans.

Below, We Will Go Over The Top Mistakes to Avoid

1. Putting off buying a home because you think you need to put 20% down. The first one we see a lot of prospective homebuyers make is not purchasing a home at all! Sometimes would-be homeowners go years without moving on a property because they are convinced they need to be able to afford a 20% down payment. Since they cannot, they assume homeownership is not in the cards for them until they have saved up a lot more money. Sometimes, this can take years. Often, this wait is completely unnecessary, because they do not need to put 20% down on a home. There are much lower down payments for some types of mortgages with the right qualifications, and there are even some home loan products that require zero down (like VA loans). Lending Bankers Mortgage can help you look into these options. That way, you do not miss out on the chance to buy your dream home.
2. Not checking into down payment assistance programs. If you are having trouble making a down payment on a home, another mistake is to assume that there are no resources out there to help you. Down payment assistance programs can help Florida homebuyers move into their dream homes right away. For instance, the MDEAT Homeownership Assistance Program (HAP) lets qualifying homebuyers buy a home in Miami-Dade County with the help of a zero-interest deferred loan. You can put that loan toward your down payment and/or closing costs. If you have questions about down payment assistance programs, we can guide you during your consultation to those that may help.
3. Assuming you don’t qualify for an FHA loan. One type of mortgage that can have a low down payment is an FHA loan insured by the Federal Housing Administration. A common mistake is believing that FHA loans are only for people buying their first home ever. But if you have owned a home before, did you know you might qualify for an FHA mortgage to buy your next? So, do not overlook this possibility when you are choosing a mortgage. You may be surprised to find out that you are eligible for an FHA loan and a lower down payment.
4. Putting down too much on a home. Above, we have focused on mistakes that homebuyers make in overlooking the chance to make a low down payment. But there is another category of down payment mistakes related to budgeting. Homebuyers do not always make a higher-than-necessary down payment because they think they must. Sometimes, they do it because they assume it is always the strategic choice for their finances. They believe that paying more upfront is always better because it means they will be able to finish paying their mortgage off faster and/or their monthly mortgage payment amount will be lower. Those are indeed great benefits of paying more upfront. But even if you can afford a large down payment, you should not overlook the potential advantages of making a smaller one. When you are just starting out in a new home, it can be useful to have some liquid financial resources that you can put into buying furnishings or improving that home. Making a smaller down payment also can boost your overall financial stability by giving you more money to fall back on if you have unexpected expenses or a change in income. Additionally, if you make a small down payment, you might have more money available to put into investments. Over the long run, it is possible that the profits from those investments could more than offset additional interest if you take longer to pay off your mortgage.
5. Not putting enough down on a home. On the flip side, it can also be a mistake to assume that a smaller down payment is always ideal. Sometimes, it makes sense to pay off more upfront when you buy a home. As we just discussed, there are many benefits to making a small down payment. But the benefits of making a large down payment are also excellent. To figure out what is right for you, do not assume there is one right answer that applies to everyone. Instead, think about your future and try and calculate as best you can whether the financial benefits of a large vs. small down payment will pay off more both in the short-term and the long-term. You could also consider additional factors such as peace of mind. Some people just like knowing that they have already paid off a large portion of their mortgage.

Lending Bankers Mortgage Can Help You Buy a Home With an Affordable Down Payment

Have more questions about down payments, or looking for guidance in choosing a mortgage with an affordable down payment?

Lending Bankers Mortgage is here and ready to assist you throughout the state of Florida! To get started now, please give us a call today at (786) 220-1100 to schedule your mortgage consultation.