How much money should I put down when buying a home?

In almost every situation I'd tell you to put down as little as possible. There are always exceptions to the rule.  But let me run some numbers from one of my home purchases.

When I bought this home, I used 100% financing for my mortgage. Everyone is telling me that is a no-no, but I can't wait to do it again. I also had the seller pay almost all of my closing costs.  So in total, I needed to bring $563 to closing.  That was my total upfront investment. This house is currently valued at $225,000. The area that I purchased this home in has been appreciating at a rate of 13 plus percent per year for the past several years. The current appreciation in this area has dropped to an average annualized rate of 1.7%. The common thought in national media would tell you that we've lost 11% year over year. while they are right that this property is not appreciating as fast it had been, let me explain to you what a 1.7% increase really means.

I invested $563 into a home worth $225,000, which is now appreciating at 1.7% per year.  In five years, this home will be worth $244,786.40, should appreciation stay at only 1.7% that entire time.  I really don't believe that's going to happen.  In fact, I think this current downturn has a window of  less than 18 months.  But let's just say appreciation in this area stays at 1.7% over these next five years, for the sake of the doomsayers in the media.

Because I invested $563, which turned into $19,786.40 over a five-year period, my actual rate of return on my investment is 1432.21%!  Oh, by the way, I happen to live in the home.  I guess the media would've thought it would be better to rent someone else's home and throw my money away rather than get a return of 1400%.  Now is the time to buy real estate; sellers are scared.  Our current economic situation in this country, overall, is very strong.  Real estate is on sale! If you would like a print out of the actual numbers used in this true example please email me at dlaplume@yourdonedeal.com.

Author

Donald W. LaPlume, Jr.

President

Sensible Mortgage Solutions Corporation