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Should I put 20% down to purchase a home?

Posted on May 27, 2017 by Deana Manzanares.

20% down Vs. 5% down

This video was posted three years ago and it is still very relevant in this housing market!  Especially for Denver’s Real Estate market.  With the rate of increase in home values, this is something to consider when deciding on purchasing a home now vs. later.

Currently, there are more buyers than there is inventory, which has caused the influx to our real estate values.  With this increasing, this only puts this question to be even more relevant.  With the values rising, is waiting so you can put more down worth the wait? Such as with the Zillow graphic which is in reference, they suggest putting 20% down because it will save you money over time because you are not paying a monthly mortgage insurance.  Although, when you do the math with the rate of increase in property values, and the time it takes to save, are you really saving yourself more money?  The answer is no.

Zillow didn’t factor in that you would have to save these extra funds.  Assuming approximate appreciation at 2% a year, and estimated it would take approximately 5 years to save the additional funds, the $300,000 home has now increased to $330,000 (10% appreciation). Which now down payment has become $66,000.   In today’s market, this approximation is well below the projection.  The rate of increase in Denver is well over the 2% a year and has been the last couple of years. This will now cost you more should you wait for the 20% down.

The best way to know what is available to you is to call a lender, get pre-approved, discuss the best options and ask your lender to show you the math, show you the breakdown.  Ultimately you decide what is best for you but it helps to have someone in your corner, educating and guiding you every step of the way.

References: 5280 January 2017 Article

The Denver Post article Mar. 2016 

 

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