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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:

757 Ocean Ave Santa Monica, CA 90402

$695,000 - 0Br/Ba -  for Sale in Santa Monica
New
Price $695,000
Living Area SqFt 553
Status Active
MLS # 21-718894
Property Type Condominium
 
 
 
 

436 Pier Ave Santa Monica, CA 90405

$3,299,000 - 3Br/Ba -  for Sale in Santa Monica
New
Price $3,299,000
Beds 3
Living Area SqFt 3,005
Status Active
MLS # 21-716990
Property Type Condominium
 
 
 

310 20th St Santa Monica, CA 90402

$3,395,000 - 2Br/Ba -  for Sale in Santa Monica
New
Price $3,395,000
Beds 2
Living Area SqFt 1,624
Status Active
MLS # 21-716110
Property Type Single Family Residence
 
 
 

6020 Bonsall Dr Malibu, CA 90265

$15,995,000 - 7Br/Ba -  for Sale in Malibu
New
01190363
Price $15,995,000
Beds 7
Living Area SqFt 10,261
Status Active
MLS # 21-717570
Property Type Single Family Residence
 
 

28394 Rey De Copas Ln Malibu, CA 90265

$919,000 - 3Br/Ba -  for Sale in Malibu
New
Price $919,000
Beds 3
Living Area SqFt 1,681
Status Active
MLS # 21-718504
Property Type Condominium
 
 
 

425 Idaho Ave Santa Monica, CA 90403

$1,100,000 - 2Br/Ba -  for Sale in Santa Monica
New
Price $1,100,000
Beds 2
Living Area SqFt 1,031
Status Active
MLS # 21-718444
Property Type Condominium
 
 
 
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