What Are the Benefits of a 20% Down Payment?
If you’re thinking of buying a condo this year, you may be wondering how much money you need to come up with for your down payment. Many people may think it’s 20% of the loan to secure a mortgage. While there are plenty of lower down payment options available for qualified buyers who don’t want to put 20% down, it’s important to understand how a larger down payment can have great benefits too.
The truth is, there are many programs available that allow you to put down as little as 3.5%, which can be a huge benefit to those who want to purchase a condo sooner rather than later. Those who have served our country may also qualify for a Veterans Affairs Home Loan (VA) and may not need a down payment. These programs have really cut down the savings time for many potential buyers, enabling them to start building family wealth sooner.
Here are four reasons why putting 20% down is a good plan if you can afford it.
1. Your interest rate may be lower.
A 20% down payment vs. a 3-5% down payment shows your lender you’re more financially stable and not a large credit risk. The more confident your lender is in your credit score and your ability to pay your loan, the lower the mortgage interest rate they’ll likely be willing to give you.
2. You’ll end up paying less for your condo.
The larger your down payment, the smaller your loan amount will be for your mortgage. If you’re able to pay 20% of the cost of your new home at the start of the transaction, you’ll only pay interest on the remaining 80%. If you put down 5%, the additional 15% will be added to your loan and will accrue interest over time. This will end up costing you more over the lifetime of your home loan.
3. Your offer will stand out in a competitive market.
In a market where many buyers are competing for the same property, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence as the lender in this scenario. You are seen as a stronger buyer with financing that’s more likely to be approved. Therefore, the deal will be more likely to go through.
4. You won’t have to pay Private Mortgage Insurance (PMI)
What is PMI? According to Freddie Mac:
“PMI is an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%. Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As mentioned earlier, when you put down less than 20% when buying a condo or home, your lender will see your loan as having more risk. PMI helps them recover their investment in you if you’re unable to pay your loan. This insurance isn’t required if you’re able to put down 20% or more.
Many times, sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their property to put down 20% on their next. With the equity homeowners have today, it creates a great opportunity to put those savings toward a 20% or greater down payment on a new condo or home.
If you’re looking to buy your first place, you’ll want to consider the benefits of 20% down versus a smaller down payment option.
Bottom Line
If you’re thinking of buying a condo and are already saving for your down payment, let’s connect to discuss what fits best with your long-term plans. Contact us today at 734-761-3060 or info@condohotline.com.
These 4 Negotiating Tips Can Help You Sell for Top Dollar
Receiving your first offer is one of the most exciting parts of selling your condo or home. And while it might seem like the hard work is finally over, the negotiation process is actually just getting started.
Even in a seller’s market, negotiating with a buyer can require quite a bit of time, skill, and guidance from your agent. However, with the right strategies, you can remain in the driver’s seat and maximize your profits.
Here’s How to Negotiate with Potential Buyers
When buyers submit an offer, they’re trying to get the best possible price, secure specific contingencies and financing, and close on their ideal timeline. As a seller, you’ll want to take their needs into consideration—but that doesn’t mean you have to give in to every concession.
Ready to hone your negotiation skills? Here are four easy tips to help you leverage a deal that gets you the price you want while keeping your buyer happy.
Review every offer with your agent
Even if you have some selling experience, it can be hard to decipher all the elements of an offer. Most offers are just a small part of a purchase and sale agreement, which includes everything from price to contingencies to deadlines, so it’s important to review every detail with your agent.
While it might be tempting to decline any offers below your asking price, you still want to consider the bigger picture. It may be worth sacrificing some equity for fewer contingencies or a cash deal. Your agent can guide you through the pros and cons of each offer, as well as answer any questions.
Don’t compromise on your must-haves
Fortunately, low inventory and rising prices have given sellers a distinct advantage in today’s market. That means you probably won’t have to give up a lot of your must-haves—like a certain price or closing date—to secure your sale.
While it’s okay to drive a hard bargain, you don’t want to appear unreasonable to buyers. In some situations, it’s common courtesy to agree to certain contingencies (such as a home inspection), offer credits for repairs, or even pay a portion of their closing costs.
Make a clear counteroffer
If you receive an offer that isn’t quite what you want, you have a few options. Most sellers choose to respond with a counteroffer, which proposes modified terms that are more beneficial to them.
The biggest factor to consider is price—if a buyer offers less than you’re willing to accept, try countering with a more realistic number. However, you’ll also want to take financing, contingencies, and timing into account. For example, you may want to ask a buyer for a different closing date or say no to excessive contingencies, as they can slow down the transaction. Ultimately, the ball is in your court, so it’s worth weighing different options with your agent.
Don’t be afraid to say no
Generally, you should always submit a counteroffer to every reasonable offer. However, if it becomes clear that a buyer isn’t willing to budge on your deal-breakers, don’t be afraid to say no. It’s also best to automatically decline any lowball offers that are around 30% less than your list price.
While it may seem counterintuitive to turn down an offer, it’s not worth negotiating with someone who isn’t serious about your condo or home. And because the market is extremely competitive right now, it probably won’t take long to find a buyer who’s willing to pay the right price.
Thinking of Selling Your Condo or Home Soon?
If you’re looking for the right agent to guide you through the negotiation process, we’d love to lend a helping hand! Get in touch with us today at 734-761-3060 or info@bouma.com to learn the ins and outs of selling your condo or home—we’re always on hand to answer any questions you might have.
Turn to an Expert for the Best Advice, Especially in 2021
As we approach the anniversary of the hardships we’ve faced through this pandemic and the subsequent recession, it’s normal to reflect on everything that’s changed and wonder what’s ahead for 2021. While there are signs of economic recovery as vaccines are being issued, we still have a long way to go. It’s at times like these we want exact information about anything we’re doing. That information brings knowledge, and this gives us a sense of relief and comfort in uncertain times.
If you’re thinking about buying or selling a condo or home today, the same need for information is very real. But, because it’s such a big step in our lives, that desire for clear information is even greater in the buying or selling process. Given the current level of overall anxiety, we want that advice to be truly perfect. The challenge is, no one can give you “perfect” advice. Experts can, however, give you the best advice possible.
Let’s say you need an attorney, so you seek out an expert in the type of law required for your case. When you go to her office, she won’t immediately tell you how the case is going to end or how the judge or jury will rule. If she could, that would be perfect advice. What a good attorney can do, however, is discuss with you the most effective strategies you can take. She may recommend one or two approaches she believes will be best for your case.
She’ll then leave you to make the decision on which option you want to pursue. Once you decide, she can help you put a plan together based on the facts at hand. She’ll help you achieve the best possible resolution and make whatever modifications in the strategy are necessary to guarantee that outcome. That’s an example of the best advice possible.
The role of a real estate professional is just like the role of a lawyer. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen throughout the transaction – especially in this market.
An agent can, however, give you the best advice possible based on the information and situation at hand, guiding you through the process to help you make the necessary adjustments and best decisions along the way. An agent will lead you to the best offer available. That’s exactly what you want and deserve.
Bottom Line
If you’re thinking of buying or selling a condo or home this year, let’s connect to make sure you get the best advice possible. We have access to all of the real estate data out there and are constantly analyzing it so we can give our clients the best advice possible. Contact us today at The Bouma Group at info@bouma.com or 734-761-3060 and we’ll help make your real estate goals a reality.