If you have had problems trying to save for your down payment, you are not alone. The 5 percent downpayment plan may be your answer. With prices for new homes increasing, you may be better off to take out a high ratio mortgage now, instead of chasing the prices upward. For instance, is you are looking at a $ 200,000 home and the prices go up by 5 percent that year, you would have to save an additional $10,000 just to buy the same home that you could buy today for $200,000.
You would be better off to apply the additional $10,000 to your mortgage instead of just paying $10,000 more for the same home.
You will have to pay a 3.75% premium for mortgage insurance to buy with only 5 percent down, but keep in mind, you would have had to pay 2.5% premium if you had 10 percent down. So the additional premium is 1.25% or $2,500 using our $200,000 home. You are further off paying the $2,500 now than to save the $10,000 and buy next year. If prices increased by only 1.25% in the year then you still break even.
This program has been extremely popular and many people have taken advantage of it over the past few years. You should note that there are price ceilings and they vary from city to city but I would be happy to discuss it with you further.