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You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home.

The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment.

I can provide some answers as you explore your financing options or speak to Dean Wong, my Lender I have worked with my entire career.

Contact Thomas Ray for all your real estate needs!

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Search For Homes:

20413 Roca Chica Dr Malibu, CA 90265

$3,495,000 - 4Br/Ba -  for Sale in Malibu
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01190363
Price $3,495,000
Beds 4
Living Area SqFt 2,713
Status Active
MLS # 21-684972
Property Type Single Family Residence
 
 

2312 6th St Santa Monica, CA 90405

$879,000 - 2Br/Ba -  for Sale in Santa Monica
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02008361
Price $879,000
Beds 2
Living Area SqFt 900
Status Active
MLS # 21-683758
Property Type Condominium
 
 

641 Jacon Way Pacific Palisades, CA 90272

$5,250,000 - 4Br/Ba -  for Sale in Pacific Palisades
New
Price $5,250,000
Beds 4
Living Area SqFt 3,068
Status Active
MLS # 21-679734
Property Type Single Family Residence
 
 
 

2121 Virginia Ave Santa Monica, CA 90404

$1,595,000 - 3Br/Ba -  for Sale in Santa Monica
New
Price $1,595,000
Beds 3
Living Area SqFt 1,470
Status Active
MLS # 21-683362
Property Type Townhouse
 
 
 

428 Hill St Santa Monica, CA 90405

$675,000 - 1Br/Ba -  for Sale in Santa Monica
New
00978710
Price $675,000
Beds 1
Living Area SqFt 694
Status Active
MLS # 21-684360
Property Type Condominium
 
 

6965 Fernhill Dr Malibu, CA 90265

$5,250,000 - 3Br/Ba -  for Sale in Malibu
New
Price $5,250,000
Beds 3
Living Area SqFt 1,500
Status Active
MLS # 21-684780
Property Type Single Family Residence
 
 
 
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