Tom Spaniel

Preston Hollow Financial Services, Inc

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Is It Worth It to Put More Than 20 Percent Down?

February 1, 2023 by Tom Spaniel

Down Payments 101: Is It Worth It to Put More Than 20 Percent Down?Are you thinking of buying a new home this spring or summer? If so, you’re not alone. Many thousands of individuals and families alike will become homeowners this year. Whether you’re a first-time buyer or a seasoned veteran of the housing market, you probably know there are significant choices to make. One of the big decisions you will have to ponder is how much you want to invest in your down payment.

With that in mind, let’s try to answer the question of whether or not it is worth it to put more than 20 percent of the home’s price in your down payment.

Ask Yourself: How Liquid Are You?

Before you can decide how much to put down, you first need to determine how liquid your finances are. That is, how much cash do you have access to? For example, if you are considering a $300,000 home, a 20 percent down payment is $60,000. If you have more than $60,000, fantastic. However, if you have less than that, you might have to do a bit of work to save up the remainder.

Even if you do have enough available cash now, you won’t have access to it once you take possession of the home. It is important to leave yourself with some cash in case of emergencies or for other uses.

Higher Down Payment, Lower Interest Rate

If you do choose to invest more than 20 percent in your down payment, it’s possible that you will gain access to a lower interest rate for your mortgage. Many lenders look favorably on homebuyers that are investing more of their own money and borrowing less. Be sure to check with your mortgage advisor to find out if you qualify for lower rates.

Lower Monthly Payments Await

Finally, choosing a down payment higher than 20 percent means that you will have lower monthly mortgage payments in the future. You are borrowing less so you will owe less. This can provide a nice boost to your monthly budget moving forward as you will have more free cash flow each month.

Try to keep in mind that there is no perfect answer to the question of how big your down payment should be. Choosing the best course of action means taking a good, long look at your current financial situation and deciding what your goals are. When you’re ready to discuss buying a new home contact us. Our professional mortgage team is happy to share our experience!

Filed Under: Home Buyer Tips Tagged With: Buying A Home, Down Payments, Home Buyer Tips

4 Reasons Why Your Mortgage May Be Denied After Pre-approval

December 27, 2022 by Tom Spaniel

It Isn't Always a Clear Road after Pre-approval: 4 Reasons Why Your Mortgage May Be DeniedSo you’ve been pre-approved for a mortgage – great! You’ve taken the first step toward becoming a homeowner. But before you start picking out china patterns, you’ll want to keep in mind that a pre-approval isn’t the same thing as a mortgage agreement. There’s still no guarantee that you’ll actually get a mortgage.

But why would a lender deny a mortgage after pre-approving a borrower? Here’s what you need to know.

Sudden Changes In Income Or Employment History

A number of mortgages will require borrowers to have consistent employment for a certain length of time. If you apply for an FHA mortgage, for instance, you’ll be obligated to have an employment history dating back at least two years. Any gaps in your employment history will require a written explanation that your underwriter will need to approve.

If you switch career fields while in the process of buying a home and it has a significant impact on your income, your lender may deny your mortgage.

Credit Mismanagement After Pre-Approval

Lenders like to see consistency – so if your credit score suddenly drops after you’ve been pre-approved for a mortgage, it sends up a red flag. Even something as minor as a late payment on a cell phone bill could affect your credit score just enough to cause your lender to deny you. Pay extra attention to your bills throughout the home buying process, and make sure nothing slips past you.

Taking On More Debt In The Interim

A number of buyers will take on more debt after they’ve been pre-approved for a mortgage. Although it may be tempting to get a new car to go with your new house, getting a car loan will change your debt-to-income ratio and cause your lender to think twice about how responsible you are. If you’re in the process of buying a home, hold off on any other major purchases until after the deal has closed.

An Unsatisfactory Bank Appraisal

Sometimes, your mortgage can be denied for reasons that have nothing to do with you. Some lenders will only issue a mortgage if the property value of the house in question is appraised above a certain level. Others will deny a mortgage if the home requires roof repairs, electrical work, or a new heating system.

You’ll want to check with your lender to see what home conditions could be cause for denying your mortgage application.

Getting approved for a mortgage is a convoluted process at best, but a mortgage advisor can help you to navigate the approval process with ease. Contact your local mortgage professional for more tips on how to ensure you get approved.

Filed Under: Home Buyer Tips Tagged With: Home Buyer Tips, Mortgage Approval Issues, Mortgage Tips

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