Should You Wait Until You Have 20% Down?

I was recently asked by a client about the potential costs of waiting until she could make a 20% down payment – since she only had enough for a 10% down payment when we spoke.  Let’s take a look at what that could mean.

Looking back to 1/4/2018 – for a primary residence purchase of $300,000 with a 20% down payment and a loan amount of $240,000 –you would have been able to lock a 30-year fixed rate of 4.00% – with an APR of 4.088%.

Also on 1/4/2018 –  for a primary residence purchase of $300,000 with a 10% down payment and a loan amount of $270,000 – and with Lender Paid Mortgage Insurance – you would have been able to lock a 30-year fixed rate of 4.375% – with an APR of 4.447%.

We’ve seen a .375% rise in the 30-year fixed rate since the beginning of the year!

Let’s revisit these same scenarios with today’s rate sheets:

On March 13^th, 2018, for this same primary residence purchase of $300,000 with a 20% down payment and a loan amount of $240,000 – the rate available for a 30-year fixed rate is 4.375% with an APR of 4.447%.

Also on January 4^th, 2018, for a primary residence purchase of $300,000, a 10% down payment and a loan amount of $270,000 – and with Lender Paid Mortgage Insurance–you would have been able to lock a 30-year fixed rate of 4.750% – with an APR of 4.844%.

So back on January 4^th, if this hypothetical borrower had decided to wait rather than buy, he/she would be getting the same rate today with 20% down that they could have locked on 1/4/2018 with just 10% down.

So – in this comparison, the cost of waiting for less than 3 months was .375% in rate.

Here is a link to the interactive Freddie Mac Primary Mortgage Market Survey:

http://www.freddiemac.com/pmms/