How Much Cash Should You Put Down On Your New Home?

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There is no question that home buying is a grueling process. Because most home prices are large, and there is only a finite amount of resources, buyers are extra meticulous about the home they want versus what they can afford. It's the duty of a Real Estate agent to methodically break down the process so that it is easily digestible step by step. The first thing to break down is this: cash investment. How much cash do you need or want or must put down? 

Verbiage is key in this game because everyone of us communicates and authenticates information differently. These three words are generally what needs to be deciphered and it can be replaced with other words that mean the same things as well. 

Need 

Sometimes when people say "need," they really mean want. So it's something that, as a real estate agent, I must be extra perceptible to what they are actually needing versus wanting. The same can be said for the other two words: "want" and "must." 

What people really need to put down as a cash investment into a property is something they must either figure out for themselves or hire a financial expert to do so. As a Real Estate Agent, I will focus on being the swiss army knife of the home buying process, but in terms of financial advice, I will leave that for the pros. 

But if you're already a personal finance connoisseur, you will already know how much cash you need to put down in order to get x% return or if it will fit within your budget without stretching yourself too thin. 
 
For simplicity's sake, I will use the FHA Loan requirements for Debt to Income Ratio. What the Debt to Income Ratio is is how much total debt you pay versus the income you generate. People can either calculate this annually or monthly, but monthly would be the preferred option as cash flow is king in Real Estate. Based on FHA's guidelines, they prefer to lend to borrowers who have less than 43% DTI.
 
You can read more about what Debt to Income (DTI) Ratio is by going to these resources: FHA.com and RocketMortgage.com
 

Want  

Sometimes we want what we can't have. This is oftentimes the case with real estate everywhere. A lot of buyers do not know what the landscape is for home prices in their neighborhoods or surrounding neighborhoods that they oftentimes ask for things that are outside of the scope. As a Real Estate Agent, I must gently help you with having a realistic view of what's probable and what's not. In some cases, low-balling works, but in most cases, it will only aggravate the listing broker and will not only harm your reputation but mine as well. There must always be a rationale for every offer that is put in for a home. As your Real Estate agent, I must prepare and research every nook and cranny of Long Island City and the Queens Metro area to provide a market analysis. 

Must

As mentioned on the first category: "Need", for many loans there must be something that must be provided in order for successful delivery of a loan commitment and eventually loan. The loan specialists will work with you to discover what you must put in to get x, y, z in benefits and tell you exactly what it will generate for you based on the rate environments, et. al. 
 
For example, for a low money down conventional loan under 20%, loan providers may require you to get a Private Mortgage Insurance (PMI). They may also work with you to get your interest rate down based on all of the factors that they delve into such as credit score, et. al, by asking whether you wanted to buy down some discount points.

Do not hesitate to ask any questions such as how wide the loan spread is if they are a mortgage broker, and if they are a local bank, if they would be able to provide a lower rate if you could put your loan with them only. If you have any technical questions related to loan servicing or provisions, contact the loan professionals. I have a few that you can explore so don't hesitate to contact me here on my contact page. 

In Short

Home buying is a grueling process. It's not for the weary; but once you're all set, packed and moved in, you will reap the rewards...Not only with the comfort of having your own place, but with the home appreciation aspect of the asset (assuming your Realtor did a good job and found you a good home).
How Much Cash Should You Put Down On Your New Home? How Much Cash Should You Put Down On Your New Home? Reviewed by Alex Sung on September 11, 2020 Rating: 5

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