Should I Make a Down Payment? Do I Have To?

I am considering buying a home soon. Should I save up for a down payment or should I pursue low or no money down financing?

If you are wondering this, that's a very good question! The answer though will depend on your other fiscal and lifetime strategies and goals as well as your daily and monthly cash flow and other needs. Some new families or couples starting out choose to make a small down payment or none at all. It is important to understand that for the first 2, 3 or 4 years of a mortgage loan, the home owner is paying mostly interest on their mortgage loan anyway! Very little money if any traditionally gets applied toward the principle mortgage loan balance.
However, some choose to accelerate payments by paying extra either monthly or by choosing a bi-weekly mortgage. There are other ways to accelerate your equity if that's the strategy that makes sense for you.

Many 1st time buyers expect to only stay at their new home for a short period, say between 2 and 5 years. It is also noteworthy to examine how often the average consumer buys and sells a home (how often they move) as well as how often the average consumer keeps their existing mortgage financing in place. Sometimes, when conditions allow or needs arise, homeowners may refinance their loan to change their term, lower their interest rate or sometimes to borrow additional money. So, there is no one particular answer. It's not a case of one saddle fitting every horse when it comes to down payments. Some people need the extra monthly money more than they need to accelerate equity.

Also, stay educated on the facts about down payments and mortgage financing. Many media sources and others will have some believing that no 100% financing exists anymore, that every buyer needs 20% down "just like the old days" or "just like it should be", and that is quite far from the truth! Through USDA Rural Development and the VA, 100% financing is very much alive and always will be.

In conclusion, when considering how much to put down one must fully understand their own personal and lifetime strategies, their intentions or plans for the property and its future and be on the same page with their borrowing partner, if they have one. Also, it never hurts to run it by a Certified Financial Planner.

About the Author
Jamie Woods. For more, visit http://www.activerain.com/jpsunshine