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Should You Buy a Home with 3.5% or 20% Down?

Paul Tosello

Looking for a Residential Real Estate Expert? Meet Paul, a Realtor with 37 years of experience and a background in residential construction...

Looking for a Residential Real Estate Expert? Meet Paul, a Realtor with 37 years of experience and a background in residential construction...

Jan 6 3 minutes read


One of the most common questions we get asked is:

“Is it worth it to just go for it and purchase a home with 3.5% down or wait until I have 20% down?

This is a really great question. If you can get a loan without mortgage insurance and a conventional loan, that's a really good thing. In our opinion, if you're in a rental position  where you're throwing away money every month instead of putting equity towards a home, you should definitely purchase sooner than later.

If you find a home you like and you have 3.5% down, you should go for it. Especially if you're going to make some improvements or changes in the home either right away or the future, you should buy the home. This will increase equity quickly when it comes time to sell.

If you need help with what projects bring in the most ROI, check out these blogs:

Another question I'd ask is, how long do you plan to stay there? If it's just two years, then no, don't buy the home. If you're still mobile, young, don't know where your next job is and life isn't settled down, don't buy a home.

Wait until your life is settled down, you've found a more permanent job and then start to think about where you want to live, what neighborhood, what type of home, your budget, and consider how much you have for a down payment.

If you can put 20% down, it's a good idea, but if it's a choice between continue renting or purchasing a home at 3.5%, you should err on the side of purchasing. 

The opportunity cost of the ownership versus renting is a huge advantage. Based off of rental rates, appreciation over time, and tax benefits, the dollar amount is so much bigger than trying to save up to a certain dollar amount. 

Another thing to consider is that rates aren't going down. Here's a good blog post about it:

Your buying power will decrease over time as interest rates continue to increase. There's limited inventory in the market which makes prices go up and interest rates go up. This will dramatically impact affordability, especially a first time home buyer.

Lessons Learned:

1. Take your time when deciding on if your life is settled down and ready for a home.

2. Hire a savvy lender that can help you determine what your budget is and if that matches your needs.

3. Educate yourself on the current interest rates with a lender to determine what your monthly cost will be.

4. If you are currently renting a home or apartment, it is definitely time to buy a home at 3.5% if you don't have 20% to put down

5. Find a mentor to guide you on your journey. You aren't the first person to do what you are doing. Leverage the experience of others.

Inspired to learn more about buying your first (or next) home?

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