Choosing your favorite property and parallelly applying for a home loan seems like an accomplishment for individuals looking to buy a dream house.
However, have you thought of how you will pay the down payment?
Down payment is the biggest up-front expense which is a segment of the property’s value of the property that you pay upfront while closing the deal.
Lesser the money you pay as the down payment more will be the fees and interest over the loan’s lifetime and vice versa. With the help of a VA loan calculator, you can determine how much you can afford to borrow, as well as what your monthly payments will be.
However, individuals generally look for low down payment mortgage options due to the unavailability of huge amounts of capital at a particular time.
Keep reading through to understand how the down payment value can affect your property offer.
How can the down payment impact your home mortgage?
The amount of down payment you are willing to pay has a huge impact on how much loan the lender will grant you and what kind of loan you qualify for.
Your long-term financial plans and other goals are also hugely influenced by the size of the down payment.
For example, if your down payments are high and you also have to deal with the fixed monthly expenses like house rent, kid’s tuition fees, groceries, etc., there are chances of you defaulting the EMIs.
On the other hand, if you pay a greater amount as a down payment, your monthly EMIs will be less, and you will easily be able to manage your fixed monthly expenses.
A larger down payment makes you less risky to the lenders, and they are likely to grant the loan amount quickly with low-interest rates.
It tells the lender that you have a consistent cash flow and a good amount of savings to help you pay off the EMIs on time.
Thus, larger down payments also lower the loan-to-value ratio, or LTV helps you to avoid fees related to private mortgage insurance, etc.
How can you save more for a down payment?
With the ongoing monthly expenses, it can prove to be challenging to save a vast amount of money for a down payment on a home.
Here are some tried and tested tips that can be a help for first time home buyers to save money:
1. Plan Ahead Of Time
Along with the regular savings and putting money in emergency funds, you must also have dedicated savings account for property buying.
After a fixed period, you can add money into your down payment fund.
This will keep you motivated that you have to make a huge investment in the coming future and have to save money for the same.
2. Cost Cutting
If you want to purchase your dream house as soon as possible, it is your sign to start slashing your spending.
Cut down or reduce unnecessary expenses like frequent vacations, eating out, going for a movie, and much more.
Spending less on your daily chores and only buying the essential items will allow you to save more toward your down payment and have extra money to pay down other debts.
If you are looking for home loan options with a low down payment, it can be helpful to get in touch with a professional mortgage advisor for further information!