Experts say that 2016 is the best year to own a property in the Beehive State. The rates are at historic lows, demand beats supply and prices in major markets are on an upward trend. Despite all these positive signs, however, there’s always one thing that scares off homebuyers, particularly first-timers: down payment.
There’s nothing wrong about putting down some cash, but the issue is with its size. Not everyone can afford to pay at least 20% of the property’s sale price out of the pocket immediately. Furthermore, it may take a while before that relatively substantial amount can be saved, delaying home ownership for many Utahns.
Fortunately, it’s only a non-negotiable requirement you set for yourself. While many Utah mortgages with an 80% LTV still exist, low down payment loans and even no money down mortgages, are making a comeback. It’s no longer mandatory to pay an oversized down payment these days and it’s only reasonable to do it under certain circumstances:
When Interest Rates Go Up
Hypothetically, if Utah mortgage rates insanely balloon for some reason, you should consider waiting and save to lower your loan amount. That’s unlikely in the foreseeable future. Industry experts consistently predicted for the rates to start increasing, but they likewise consistently missed the mark. By all means, you’re free to pay more than the minimum down payment set by a lender, but to pay as much as 20% at the expense of exhausting your cash reserves sounds irrational by today’s standards.
When You Have More Than Enough Assets
If you have enough greens in your bank account or substantial equity in your current property, putting down 20% on a new mortgage is understandable. Especially if you would still have a number of liquid assets to rely on through tough times, go ahead and keep your would-be debt as small as possible to be paid off faster.
When You Seriously Hate to Pay for PMI
Paying Private Mortgage Insurance wouldn’t hurt that much if it means you can get a mortgage without putting down that money, but not everyone is a fan of it. PMI gets a bad rap it has no value to borrowers whatsoever. If you’re one of the many that loathes spending on nothing, then pay a 20% down payment — or get a piggyback loan — to uphold your principle.
A large down payment is useful in many ways, but it’s also disadvantageous with its less-talked-about dangers. But if this is the only hurdle stopping you from owning a house, three is now the magic number.