*Large Down Payment?*

My clients always ask, "What is the best way to structure my loan."  I can't answer if they want to go interest only, balloon payment, or conventional loan, but I can help guide when they ask about a down payment.

A home buyer can put down from as little as 3 percent to as much as you want on your home purchase, if you have money in the bank, you know what you can afford monthly for your house payment without being strapped.  If you put down less than 20 percent on a home, you will be hit with Mortgage Insurance, which I have seen be as low as $150 per month up to $500 per month.  It all depends on the amount of money you put down and your credit scores.

Let me give you a scenario. I have a client who wants to buy a home for $450,000. They have $100,000 in the bank and are considering their down payment.  If they put down 5%, they will have money still in the bank to do other things with, like buy a new car or a boat cash.  Because they have good credit rating their PMI insurance would only change by about $125 per month.

Light bulb! Why would you want to take all of that money and invest into something that is going to decrease in value? My recommendation is to put 10% down on the home which is $45,000, and purchase a small income producing property for $250,000, down payment of about $50,000,  and make money on that down payment every month, plus save for your future!  Somebody else will be paying your mortgage off and soon enough you will have equity in the home to make the next home purchase.

I understand a boat, a car, a vacation are all fabulous and wonderful things to do, but why wouldn't you want to spend your money and produce more of it!  If you buy the boat, car, motorcycle on credit, (which if you can't qualify for, you should not be buying anyway!) you will have a payment, but maybe your income producing property will cover it each month and soon enough will be paid off by somebody else! In a few years or even months, you can re-finance the loan and take money out to buy the next property, and the next, and the next.  Soon enough you will be a real estate millionaire and be able to purchase whatever you want.

So bottom line, my advice is to keep as much money in your pocket to purchase income producing properties!