You Don't Have to be Stuck with a High Rate—Use Your Down Payment Differently

As they say, there's more than one way to crack an egg. The same is true when buying a home—there's just more math involved. That's where your loan officer comes in! They can provide you with different options so you can get the most from your savings. When you're ready to choose, keep in mind how long you plan to live in the home as that will be a major factor in your decision.

What is a Down Payment

A down payment is the amount of cash you invest in your new home at the time of purchase. For example, if your new home costs $500,000 and you want to put 5% down, you would need $25,000 in cash.

How Much Should You Put Down on a House

Figuring out how much money to put down is a major step in the home buying process and will likely be your largest up-front cost. The down payment is expressed as a percentage of the purchase price of the home. A smart down payment percentage depends on a variety of factors, including the type of loan, how long you plan to be in the house, and your interest rate.

Do You Need to Have a 20% Down Payment

No, you don't have to have 20% saved. A big down payment is a significant investment in your home and does give you a sizeable amount of equity as a homeowner right away, and helps you avoid having to pay private mortgage insurance. But, putting 20% down on a home is not ideal for everyone, especially first-time home buyers. Fortunately many lenders offer loans that require a smaller down payment and options that provide down payment assistance. WaFd Bank offers a Smart Start mortgage with down payment assistance for first-time home buyers.

Does the Down Payment Have to Come from Your Savings

Good news, the answer is no! Depending on the lender you choose, funds for your down payment may be able to come from different sources, but you should always check with your mortgage lender if you're using alternative sources for your down payment.

Your down payment can come from several different sources, including:

• Your own funds/savings/investments
• Gift funds provided by family
• Down payment assistance programs
• Other sources, such as seller contributions, seller contract, carry back financing, and more

Find Out the Seller's Goals

Work with your realtor and the seller's goals (quicker closing? Rent back provisions? Foregoing repairs?). This way you can come to an agreement you both are happy with. Who knows, you might also end up better off than you thought you'd be and everyone wins.

Permanent Buy Down

You don't have to accept a high interest rate. Your lender can help you use your money wisely to meet your home buying goals. Sometimes, that's putting the money you saved partly towards the down payment and partly towards buying down your interest rate. It's a bit like prepaid interest. Your lender gets an upfront payment and you enjoy a lower interest rate and save money over the life of your loan. This can be a great option if this is the last home you plan to buy or you'll stay for several years.

Lower Monthly Payment

Sometimes cash flow is the priority. Housing payments are expensive, so keeping your budget in mind is important. Usually, this means putting down at least 20% on your home so you don't have to pay private mortgage insurance (PMI). But you do have other options! Using your savings in different ways can get you a lower monthly payment, but don't forget to look at other mortgage types as well, such as an adjustable rate mortgage (ARM). Ask your lender to help you determine the best fit for you.

Rent Back Provisions

In this scenario, the seller will sell you their home, but they will continue to live in it and pay you rent (since you now own the home) for an agreed upon amount of time. If you're renting, this gives you a chance to finish your lease and avoid paying hefty fees to move out early. This also allows the seller more time to buy their next house so they don't have to move twice.

WaFd Bank Is Here to Help

Our loan officers are here for you, and they're also good at math! We'll crunch the numbers for you to make sure you can get the most out of your home savings, whether that's buying down your interest rate or putting all of it toward your down payment. WaFd Bank is also primarily a portfolio lender. Since we started serving communities in 1917, we prefer to keep loans on our books so we're always there to work with our clients, so you'll know where to go with questions or to get help. Give us a call at 800-324-9375, visit your neighborhood branch, or find a loan officer ear you to get started today!

All loans subject to credit approval.