The Art of the Downpayment

There is an art to figuring out exactly how much of a down payment you should make on a house. But don’t let the basic concept of a down payment deter you from searching for your new home.


So, what is considered an appropriate down payment?

Well, typically putting down 20% of the cost of the home will help you to avoid paying private mortgage insurance. And typically 20% is viewed as a good “average” amount to put down on a house. There is a fair amount of people out there who will encourage you or even require you to make a 20% down payment (if not more)! But that does not mean 20% is absolutely what you have to pay. If you have the 20% saved? Put it down. It will bring the amount of money you need to borrow for your mortgage significantly less.


Just because you have it, though, does not mean you need to spend it. And, yes, this does apply to down payments, too. Paying for more than 25-30% for your down payment may not be the best investment for you. Even though you may have the “cash” on hand, it is important to take other costs into consideration before you do. Those other costs range from closing costs to realtor fees to general maintenance of your home.

While it may seem like a great idea at the time, making a large down payment may not be the the ideal move for you in the future. Other options, besides making a large down payment, can be taking out a mortgage with a shorter term- so 10 years rather than 30, for example. You will ultimately pay less in interest and will have more “cash” on hand in the meantime. If you have questions about what is the best move for you, talk to one of our experienced loan officers. They can take a look at your unique situation to find what is best for you.

The Under 20 Crowd

Now, just because you don’t fall into the 20% or “more” categories doesn’t mean you can’t actually afford to buy a home. In certain areas (and in certain situations) you have the ability to put down as little as 0%. The USDA and VA loans offer 0% down, MSHDA offers 1% down, and FHA offers 3.5% down. Each of these options definitely makes purchasing a home significantly less daunting and more approachable for many buyers, especially first time buyers.

Like we mentioned before, if you are putting down less than 20%, you will be required to pay private mortgage insurance (PMI). What is it? Essentially insurance for your lender, in the event you foreclose on your home. And, as the borrower, you pay the premiums. The average cost of PMI can range from $30-$100, depending on the amount you make for your down payment. While that may seem like a lot of money to pay on top of your monthly mortgage payment, it does allow for you to purchase a home without making a huge down payment. Just think about it- 20% of a $300,000 home is $60,000. An additional amount of money each month can be called a “small-er” price to pay to buy the house of your dreams.

Now what?

The most important thing we can recommend is talking to a loan officer. Every individual situation is so unique. Not everyone can easily fit into a predefined category. The best approach is to talk about the amount you can put down, the monthly payment you can afford, the other factors in your life- with someone that has experience in the mortgage industry.

Don’t just take our word for it- we have so many happy clients (and new homeowners) who are happily living in the house of their dreams.

Total Home Lending

Natasha Mason


The Art of the Downpayment2020-09-28T15:14:20+00:00

First Step: getting pre-approved for a loan

If you are actively searching for a home, there is one thing that absolutely must be on the top of your “to do” list.


It is a (conditional) written commitment from your mortgage lender that states the loan amount you are approved for. Pre-approval should not be confused with a pre-qualification on a loan, however. Pre-qualification is a preliminary step that does not require as much financial information and, because of that, is not a sure thing. In order to get pre-approved for a loan, you will need to provide all of the information necessary for your lender to conduct an extensive review of your financial background.

Getting approved for a loan is something that, of course, needs to happen regardless. So taking the time to get pre-approved with your lender will make your home buying process significantly easier.

First, once you have been pre-approved for a certain amount it allows you to start shopping within your budget. If you are approved for a $100,000 loan and are able to contribute a $40,000 down payment, you know exactly what price range you should be looking in. Without the pre-approval, you may spend a significant amount of time and energy looking at homes that you will never be able to buy.

Besides making the entire home shopping experience easier, there are many sellers who will only consider buyers who have been pre-approved. And the sellers who do not require a pre-approval letter? Well, there are many who will take your offer more seriously because you have been pre-approved. While that is not a guarantee, having it will definitely put you ahead of the game.


As if that was not quite enough, having a pre-approval letter can even save you some money. Sellers may be more willing to lower the asking price, cover closing costs or even make other allowances.

Now, how do you get started? Start talking with your mortgage lender. The sooner you have been pre-approved, the sooner you can start a home buying experience with ease (and potential savings)!

First Step: getting pre-approved for a loan2020-09-28T15:14:21+00:00

So, You’re A 1st Time Home Buyer

Top Tips for First Time Home Buyers

You’re on the hunt for your first home. It is an exciting milestone in your life. Not to mention one of the largest financial decisions you may ever make. Don’t fall into the “rookie” home-buyer category. Our advice? The more you know about the process, the easier (and less daunting) it is going to be.

We are here to help. These are some of our “top tips” for you to remember when buying a home.


The (sometimes) forgotten credit score

The credit score. Your mortgage company, of course, will pull that score, but it is still a good number know before starting the home-buying process. If there are any mistakes or issues with your score, it is easier to remedy those before you have found that perfect home. Additionally, knowing your score in advance will allow you the opportunity to repair any minor blemishes. One more good thing to know- your mortgage banker (and us!) can sometimes provide tips on how to deal with those flaws.


Pre-approval letters are an absolute must

So, what is a pre-approval letter? It’s a letter from your mortgage lender stating what loan amount the borrower (you) is qualified for. So, yes, stating how large of a loan you are able to take out.

Now, why they are important? First and foremost, it allows you to look for homes that are in your price-range. It will save you a lot of time (and potentially a lot of stress) knowing what you can afford and searching accordingly. Then, when you do find a home you want to put an offer on, having that pre-approval letter puts you ahead of the game. While not a guarantee, sellers may take your offer more seriously since you have already been pre-approved for a loan. Not to mention, they may be more willing to lower the asking price, cover closing costs or make other allowances.


Down payments made easy

Whether you are a first time home-buyer or are looking to buy again, you have probably been thinking about that “down payment.” The larger down payment you make, the smaller mortgage you have. And, subsequently, the less you have to pay back over the course of the loan.

Is there such thing as “too big” of a down payment? Actually, yes! A 20% down payment is typically viewed as “ideal” by lenders. When you put 20% down, you don’t have to pay private mortgage insurance (PMI) which provides insurance to your lender, in the chance you default on your mortgage. Additionally, it can qualify you for a lower interest rate than someone who makes a smaller down payment.

Realistically, however, 20% is a significant sum of money, especially depending on the house you are looking at. A lower down payment does allow you to become a homeowner faster because you won’t have to save up as much money before buying.

Whether you have the 20% readily available or not, there is one important fact to remember- making a down payment is never a bad investment. Putting money into your home is lower risk than, let’s say, investing it in the stock market. It is a good idea for any homebuyer because it ultimately reduces your risk and allows for immediate home equity. If you have questions or wonder what size down payment is best for you, we recommend discussing your particular situation with your lender. They can provide insight into your unique situation.


Life happens- be prepared!

You’ve found the house. You’ve been approved for a loan. You’re good to go, right? One thing we always recommend is reserving cash for emergencies. Because, life happens! The last thing you want is to move into your new home and find yourself in dire need of money (and fast!). So, plan accordingly when making your down payment and considering your loan options. It’s better to be prepared!


Consider the resale

It’s your first home, you’re excited! You may not be planning to sell in the foreseeable future, but it is important to think about selling your home. If (or when) the time to sell your home comes, will it be easy or difficult to do so? Thinking about the preferences of the “average” homebuyer and keeping those preferences in mind while finding your own home will make reselling the home that much easier.

One huge factor is the school district. Maybe you don’t have children in your home right now, so you’re not thinking about schools. But finding a home in a desirable school district, or even one with a school of choice nearby, could be an added benefit for the resale of your home.


Full disclosure and home inspections

While most states do require sellers to disclose any potential problems with the home or the property, they may not always be aware of existing structural issues. Although most purchase agreements are dependent upon a home inspection, you should 100% demand one. Spending the money to hire a licensed professional to inspect your potential new home is the only way to guarantee there are no major structural issues with the home.

What will a comprehensive inspection include? Heating and cooling systems, plumbing and electrical systems, structural integrity of walls, floors, ceilings, foundation and roof. The condition of gutters, insulation, ventilation, major appliances, garage… Finding an issue with any of these things can be extremely costly, so discovering them before signing any paperwork is a huge money saver.

You should also be present for the inspection. Ask questions as you go through the house. Sure, houses need repairs, but there may be a chance the problems with the house will be so expensive it is no longer a home you are interested in. It may seem like a lot of money now to pay for a home inspection, but you could ultimately be saving yourself thousands in the future if the house does have major issues.


The hidden costs

Buying a home can feel like a whirlwind. But while you are thinking about a down payment, an affordable monthly mortgage payment and even realator costs, there are a few “hidden” costs that many first time home buyers forget about. Homeowners insurance, property taxes, appraisal fees, moving costs, escrow costs, tax service fee, credit report fee… Just to name a few.

Ask questions. Make sure you are aware of any and all fees, taxes and additional costs you may need to pay before the “buying” process is complete. And, finally, be prepared for just about anything. When it comes to owning your own home, there’s nothing wrong with being a little “over-prepared.”



By Natasha Mason

So, You’re A 1st Time Home Buyer2020-09-28T15:14:21+00:00
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