Myths About Down Payments to Stop Believing When Purchasing a Home in Ladera Ranch
When you’re getting ready to purchase a home in Ladera Ranch, whether it’ll be an investment property or the place where you lay your head every night, you have to have a down payment ready to go. There’s all kinds of information flying around saying how much you should or shouldn’t have for a down payment on a home. With all this information coming at you in all directions, you might be wondering what to believe. Here are some common misconceptions when it comes to putting a down payment on a home in Ladera Ranch.
3 Myths to Stop Believing Now!
Myth #1: Cash always wins
In a competitive market like Orange County, you’ve probably heard stories about cash buyers coming in and swooping up homes from buyers who don’t have an all cash offer. If you’re working with a loan and a small amount down, you might be right. A cash offer gives the seller the ultimate ease and peace of mind because there usually aren’t any last minute hiccups at the finish line. But sometimes, a cash offer isn’t necessarily the most important thing to a seller.
If you’re willing to put in an offer that is higher than the asking price, you can still come out on top. You can also write a stellar personal letter that appeals to the seller. For instance, if you have a young family and you’re moving from your ocean view condo to a more suitable space for children, you could appeal to the seller's sense of compassion.
While cash is a tough thing to beat, it isn’t impossible. Don’t be discouraged when you’re going up against a cash offer, think outside the box and see if you can come up with another way to appeal to the seller when you’re purchasing a home in Ladera Ranch.
Myth #2: You shouldn’t put more than 20% down
For buyers these days, having 20% saved for a down payment on a home is one of the biggest challenges they face. But if you’re one of those investors or home owners that can put more down on a home from the start, should you actually put more than a 20% down payment on a home in Ladera Ranch if you’re able? You’ve most likely heard that you shouldn’t put more than what you need to put down, but if you do, there are some great benefits that can come with it.
First off, you avoid the mortgage insurance. But more than that, it’s signaling to the borrower that you’re a trustworthy buyer. If you’ve purchased homes before, you have a track record for the lender to look at. But if this is one of your first home purchases, putting down more than 20% could get you lower interest rates, which could save you tens of thousands of dollars over the life of your home loan.
You also have to consider what’s best for you, though. If you put 25% down, you might see a reduction in your interest rates. But with 35% down, you will definitely start to see more of an impact. However, if you have other investments that could benefit from an influx of cash, you may want to consider using that extra money elsewhere. At the end of the day, putting more than 20% down will only benefit you, so don’t be nervous to do so.
Myth #3: Paying mortgage insurance is smarter than paying a bigger down payment
Mortgage insurance may seem like a small price to pay in order to be able to have some money for other investments when you’re purchasing a home, but you need to calculate what it will cost you. If you are working with a conventional loan, you’ll have to pay the mortgage insurance until the principal balance reaches 78% or less. If you’re working with an FHA loan, then you will have to pay the mortgage insurance for as long as you live in the home, or pay off the mortgage. Before you decide how much you should put down, weigh out your options and know that saving a little money now could cost you more in the long term. It’s never a bad idea to put down more than necessary to avoid worrying about mortgage insurance.
Purchasing a Home in Ladera Ranch
When you have your down payment ready to go and you’re ready to start finding your next home or property in Ladera Ranch, you’re going to want to work with someone who’s going to be able to represent you in this competitive market. I have lived in Orange County for many years and have worked in the Ladera Ranch area for just as long. Whether you’re looking to purchase a home in Ladera Ranch or other parts of Orange County, I can help. Call me today at 949-285-3215 to get started with the home buying process.
- M: 949.285.3215