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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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1641 Berkeley St Santa Monica, CA 90404

$1,795,000 - 2Br/1Ba -  for Sale in Santa Monica
New
Price $1,795,000
Beds 2
Baths 1
Living Area SqFt 1,053
Status Active
MLS # 20-557308
Property Type Single Family Residence
 
 

125 Montana Ave Santa Monica, CA 90403

$850,000 - 1Br/1Ba -  for Sale in Santa Monica
New
02031719
Price $850,000
Beds 1
Baths 1
Living Area SqFt 972
Status Active
MLS # 20-567628
Property Type Condominium
 

159 Fraser Ave Santa Monica, CA 90405

$3,599,000 - 4Br/4Ba -  for Sale in Santa Monica
New
02080188
Price $3,599,000
Beds 4
Baths 4
Living Area SqFt 2,820
Status Active
MLS # 20-567632
Property Type Single Family Residence
 

1501 Decker School Lane Malibu, CA 90265

$4,995,000 - 2Br/3Ba -  for Sale in Malibu
New
01102914
Price $4,995,000
Beds 2
Baths 3
Status Active
MLS # 20-567092
Property Type Single Family Residence
 
 

842 12th St Santa Monica, CA 90403

$749,000 - 1Br/1Ba -  for Sale in Santa Monica
New
Price $749,000
Beds 1
Baths 1
Living Area SqFt 623
Status Active
MLS # 20-567610
Property Type Condominium
 
 

16780 Livorno Dr Pacific Palisades, CA 90272

$1,995,000 - 3Br/3Ba -  for Sale in Pacific Palisades
New
Price $1,995,000
Beds 3
Baths 3
Living Area SqFt 1,841
Status Active
MLS # 20-567860
Property Type Single Family Residence
 
 
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