Is It a Good Idea To Wait and Save Up for a Larger Down Payment?

 

Most people know that most owner-occupied homes can be bought with just 3% down, but often I hear from people who want to delay purchasing so that they can save up and put down a bigger down payment to reduce their monthly mortgage payment or avoid paying mortgage insurance. Many times this is a good and responsible idea, but it’s important to do the calculations to see if that’s a good idea for you and your market, because as I’m about to show you in certain situations it could actually cost you money.

Let’s say the size and location of the type of house you’re looking for is around $350,000 (near the Austin median). You have the minimum 3% ($10,500) required to buy now, but you think in a year you can save 10% ($35,000) so that your monthly payment will be lower.

So far so good.

So a year later you have your $35,000 saved and you start looking at the same type of houses, only in the last year those houses have appreciated 8% (a very normal if not conservative rate of appreciation for Austin). So now they aren’t worth $350,000, they’re worth $378,000.

In this scenario waiting a year cost you $28,000 in the purchase price.

You might say, “Yes, but I still have a larger down payment so won’t my monthly payment be lower.” The answer is, in this scenario, NO!

Using a mortgage calculator, we can see that putting 3% down, on a $350k property, assuming 4% interest, your monthly payment comes out to $1,621.00

Now if you put down $35,000 on a $378k property, using the same 4% interest, your monthly payment comes out to $1,638.00

So in this scenario, you waited a year to own a home and it cost you $28,000 in the purchase price plus $17 a month for the life of your loan!

If waiting to save for a bigger downpayment makes sense for you depends on many factors including the appreciation rate in your area, and how fast you can save money. To find out what makes sense in your situation, contact me at [email protected].

I'm teaching a home buying class on March 31. Get all the details and register at: AustinHomeBuyersClass.com

Welcome Friends!This is the first episode under the new name "Buying A Home In Texas Podcast"!Thanks for joining us. On this episode I interview an excellent Realtor in Houston, TX, Evan Compean. Evan's been a Realtor for 4 years and been in Real Estate for 12. Evan educates us on the Houston market.If you want to contact Evan, you can reach him at:office 281 901 0140mobile 281 901 0140email [email protected] 2323 S Voss St Suite – 120Houston, TX 77057His website is: http://www.thebayoucity.com/Remember if you're looking to buy or sell real estate in Austin, TX you can contact me at:[email protected]

4 Steps Covered in this Episode1. Stick with it, and perservere.2. Shop for houses listed lower than what you can afford.3. Don't ask the seller to pay any closing costs.4. Have a particular mindset about the inspection.

Building a New Home

1. You still need a Realtor!

Advantages

1. Homes built for modern families.

2. Energy efficient

3. Should be no repairs for awhile/warranties

4. Often good value. Home for $.

Factors in Pricing

1. Base price

2. Plot premium

3. Upgrades

4. HOA

You can sign up for my next First Time Home Buyers Class at http://www.skillshare.com/Buying-Your-First-House/777144784/1570247867/classroom/syllabus

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Contact me at [email protected]

On this episode I talk to Kim from Gracy Title about title insurance. What it is, and why you need to get it. We also talk about HOA's, and everything you need to know about closing day. Enjoy and as also email me if you have questions & feedback or if you need a referral for a Realtor in your area.

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-Shane Blackshear,

Keller Williams, Realtor