If you listen to the Dave Ramsey Show or have read any of his books, you know Dave strongly encourages people to put 20% down on a 15 year fixed rate mortgage – period!  Dave’s intention is to keep you out of future trouble by making sure you have prepared in advance to own a home by saving money, and have adequate income to pay off the home early by being able to qualify for a 15 year payment. 

Starting in 2008, we saw many casualties of the minimum down payment strategy across the country with record levels of foreclosures.  Many of those were caused when loan programs that required little or no money down were used to purchase homes with the intention of reselling in a few years.  But when home appreciation stopped or dropped, those people were unable to sell their homes for enough to cover the amount they owed.  In addition, there were thousands of homeowners that wanted to refinance, but were caught in the same situation – they didn’t have enough equity in the home to refinance out of their current loan.

All of these real situations suggest there is wisdom in having a greater equity position in your home from the start – and making efforts to pay off your loan early with extra payments when possible.  We are advocates of having a healthy emergency fund over and above your down payment and closing costs, as well as maintaining one throughout your financial life.  We do understand there are situations where when all options are weighed, it is best to put very little down – provided there is a plan to pay extra payments soon after the loan has closed.  Again, you need to look at both the payment options side-by-side as well as the 5 year ending balance to understand which option is best for you. 

If you are interested in purchasing a home and need advice on which program is right for you, Churchill Mortgage would be happy to assist.  Contact one of our Home Loan Specialist at 1-888-562-6200 or Request A Call Back on our website http://www.churchillmortgage.com/ and we will contact you at a time that is convenient for you.