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Is it wiser to put down the minimum down payment for a home or to completely drain my savings with a 20% down?

What are the advantages and dis advantages to each?

jenkin7 · Posted: Tue Jul 07, 2009 11:38 pm Post subject:

Hi Navi,

You can qualify for an FHA loan by putting down only 3.5%. But the more down payment you make, the better interest rate you get on the loan. The main advantage of putting a considerable amount of down payment is, the interest rate on the loan is reduced. Apart from the down payment, you can also use the money to pay an extra discount point upfront to lower the interest rate. However, it is not advisable to use all of your savings to make a huge down payment. You can pay extra down payment or an extra point upfront, but you should also keep some money in your savings to use in times of crisis.

elnoralittle · Posted: Wed Jul 08, 2009 5:22 am Post subject:

I don't nessicarliy agree with the statement that the more you put down the better the rate. That would apply to conventional loans.
The FHA program is designed for homeowners that want to put less down and first time homebuyers that may not have saved up enough.
Every lender is different on what they think is best.
For every $1000 you put down, it will lower your payment about 6-7$.
I personally, do not think it effective to drain your savings if you do not have to. If the payment at the 96.5% is comfortable to you, and you won't be stretching yourself, I would go that route.
You will have mortgage insurance, which on a conventional 80% you wouldn't. If you go to a 95% loan, on FHA the monthly mortgage insurances is slightly less.
Just because you go FHA, doesn't mean you can only put 3.5% down..you can put as much as you want down. It is all about the rate, and the payment, what is comfortable to you?
Anything can happen today, tomorrow, next week, month or year. It is nice to know you have a little security stashed away.

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20% down payment or minimum 3.5%?