Misconceptions around down payment (needing 20% down or paying Private Mortgage Insurance!)
Truth: There is a misconception about the amount of money needed for down payment. Many home buyers feel they need to put 20% down at any price point, whether it is $200,000 or up to $1mm and beyond. It is also a belief that if a home buyer puts down less than 20% they will have mortgage insurance.
The Story: Tolisano received a call from a potential home buyer to purchase a single-family home. The buyer wanted to buy for around $700,000 and knew he didn’t quite have the 20% for down payment and closing costs. He also didn’t want to use all his liquid savings and be left with nothing in his is accounts once he closed. Often consumers believe that they need to have 20% down or need to pay Mortgage Insurance, and that is often not the case. His realtor was very proactive and urged his client to start the conversation with Tolisano. Tolisano interviewed the customer to find out his home buying goals, his financial goals, his payment criteria, and then met with the customer to review options.
The Solution: Tolisano’s meeting provided the customer with an analysis of a $700,000 purchase price with 10% down ($70,000), utilizing a first and second mortgage combination. The first mortgage was equal to 80% of the purchase price ($560,000), and the second mortgage was equal to 10% of the purchase price ($70,000). This allowed the customer to finance 90% of the home and put 10% down, instead of using all his liquid assets for down payment. The customer was able to save some cash in his pocket which is always helpful when moving into a new home. Let’s be honest, you must fill the cupboards, possibly buy new furniture, and make the house your home!
Tolisano believes that his role as a mortgage loan originator is to not only provide great service, and a process that makes his clients lives as easy as possible, but also to provide financial advice that will set them up for success. Being a homeowner is the American Dream, and making sure you have a sound financial plan, including your home loan product and term is the key to long term financial success.
If you are buying a home at any price point and are unsure if the money you have is enough to get you into the home of your dreams, please reach out to Jay Tolisano for a complimentary consultation.