Is 20% down payment right for you??

Is it worth putting down 20%??

When I was reading the KMC Blog this morning, I really liked the topic of weighing your options as a consumer in the process of getting a home loan.  This is a difficult question to ask yourself if you are purchasing a home.  Right now with the current rates, every $10,000 costs roughly $50 per month.  Most of us can make $50 more a month work but might have a hard time making an additional $10,000 down payment on a new home.

These are perfect questions to ask not only your Realtor, but your lender.  Working with a trusted lender will help you understand these options to the fullest.  Depending on the type of loan you get you also may have a PMI (Private Mortgage Insurance).  For more information on PMI and the rules, please check out the FTC's Site: Click Here

Also, speak with your tax consultant about the amount of deduction you will be able to have with a mortgage and PMI.  

This past week I was at the National Association of Realtors in Anaheim, CA I went to hear Chief Economist Dr. Lawrence Yun speak.  The big take away from that report was that rates will go up as inflation increase.  Every economist and money manager will tell all of us the same message....inflation increases are inevitable over the next few years.  They won't be extraordinary, but they don't have to be to affect the mortgage rates.  His prediction is that rates will increase .5% to 1% each year for the next 3-4 years.  That means that rates will most likely be around 4.5%-5% next year, 5% -5.5% in 2013, 5.5%-6% in 2014.

Here is what that means in real dollars.  If you have a $200,000 mortgage that you are looking to have when purchasing a home, a mortgage with 20% down and 4% interest rate will cost you $764 a month with P&I( taxes not included in any of these calculations).  At 5% this is $859 a month.  This is $95 more per month, $1140 more a year and $34,200 more over 30 years!!!  The difference between 4% and 6% is even greater.  A month it is $195 more a month, $2340 a year and $70,200 in 30 years!!

Showing you these numbers is not to scare anyone...I hope that you are not after seeing this information.  I want to make sure that everyone that is looking to purchase a home is well informed and does what is best for their personal economy.

With Thanksgiving around the corner, it is important to remember what we are thankful for and all that we have and all of those people that are in our lives.  Happy Thanksgiving!