Making home financing work for your financial plan

As you consider your complete financial plan, you may wonder how buying a home would work alongside your other goals — especially when you factor in the down payment and ongoing monthly payments.

We'll help you think strategically about how to maximize your cash flow and liquidity. Consider these tips as you decide what makes the most sense for your broader financial picture.

While you may think the typical requirement for a down payment is 20% of the home's sale price, it's possible to put down a higher or lower percentage. There are strategic tradeoffs that the funds may leverage throughout the process — for example, if you pay less than 20% for your down payment, lenders may require you to pay private mortgage insurance (PMI) as part of your monthly mortgage payment.

When deciding on a down payment amount, think about other ways you might use those funds, which can help you determine how much you want to borrow. Be sure to discuss your loan options with a home mortgage consultant.

At Wells Fargo, you can put as little as 3% down with some fixed-rate conforming loans, and 10.01% down with a jumbo loan.

Depending on your other goals within your plan, you may wish to drive down your principal by utilizing cash reserves or leveraging existing home equity.

If you're selling a property and looking to buy a new home, Wells Fargo's jumbo loan recast option may help you utilize your existing equity.

• After you make a principal payment of $20,000 or more, we'll recalculate your monthly principal and interest payments — using the reduced principal balance and your then-current interest rate — over the remaining mortgage term.
• Your monthly mortgage payment will be lower, but you may pay more interest over the full mortgage term than you would by making a principal reduction without the recast option.
• No transaction fee is required for the recast option.
• Certain timing and other requirements must be met.
• Consult with a home mortgage consultant for more details.

If you want to lower your monthly payment to prioritize other financial goals, an interest-only jumbo loan requires that you only pay the interest portion of your payment for the first ten years of the loan. This results in a lower monthly payment for that initial period. If you go this route, keep these in mind: 

Keep in mind, when choosing an interest-only mortgage, it’s important to plan for how your long-term finances may be impacted. For instance, it can take longer to build equity. Also, the total interest paid over time may be higher, and monthly payments will rise after the interest-only period ends. Therefore, this option may make sense if you:

• Expect to sell your home in the near future.
• Have a growing or fluctuating income.
• Plan to refinance your mortgage before the interest-only period ends.

If you're seeking a lower interest rate to account for other goals in your financial plan, you may be able to receive a lower initial rate with an ARM compared to a fixed-rate mortgage.

With an ARM, you can select a fixed rate for the first three, five, seven, or ten years. Once the fix-rate period ends, your rate may adjust every six months as the market fluctuates. While ARMs may lower your upfront costs, payments are subject to change after your intro period. Learn more about ARMs.

As you consider buying a home and how it fits into your overall plan, you may be able to leverage a combination of your savings alongside credit and debt to make your purchase. Learn more about how credit, debt, and savings come together when buying a home.

Talk to a home mortgage consultant if you have questions about determining how home financing can fit into your broader plan.

If you extend your loan term, you may pay more interest over the life of your loan.

If you are a service member on active duty, an eligible spouse, partner, or dependent, or currently receiving SCRA benefits, please consult with your legal advisor prior to seeking a refinance of your existing mortgage loan. In some cases, a refinance may impact your eligibility for benefits under the Servicemembers Civil Relief Act or applicable state law.