Buying A Home
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Explain to me why down payment is so important
This is proabably a super stupid question as we've already put an offer in and everything, but I never understood why the downpayment was so important....doesn't the seller get the total purchase price amount at closing anyway (minus comissions, fees etc)? Why would it make one offer more valuable versus another?
For example: Two buyers offer on a house, have similar credit, but buyer A has 5% down payment, and buyer B has a 20% down payment. Buyer A (5% down) offers more on a house than Buyer B (20% down).... why take buyer B's (20% down) offer versus Buyer A's (5% down) higher offer on the same house?
Thanks in advance! 
Re: Explain to me why down payment is so important
Another reason is that a larger down payment it makes you less of a risk to the lender. Their theory is the more of your own money you've invested in the house, the less likely you are to default or walk away from the loan.
A down payment is important to the buyer because the more you're able to put down, the more ownership equity you have in the home (the difference between the home's value and the amount owed).
It helps save you money by eliminating PMI (with a large dp), having a smaller mortgage amount and therefore saving interest money over the long term, possibly being able to obtain a lower interest rate on a shorter term loan, just to name a few.
Lender and buyer benfits of a higher down payment aside, I don't really understand the advantage to the seller to accept someone with a higher down payment, versus someone who has a lower down payment but offers more for the property..... when in the end both have loans that are guarenteed through a lender, and the seller will get paid in the end with either buyer....
Thanks
As a seller, one might prefer a buyer with a 20% downpayment because that means they most likely are doing a traditional loan. With a 3-5% downpayment, they are most likely doing an FHA loan and with FHA loans come restrictions. Some properties may not be up to par: things need to be fixed, replaced, etc. As a seller, I wouldn't want to put any more money than necessary into my house to get it sold and FHA restrictions would add costs on my end.
Agreed. FHA will make you repair all kinds of things that a traditional mortgage would not.
Also if you are selling a condo or another property like that there may be restrictions on the number of FHA units you can have in your building so you'd prefer a buyer with traditional financing.
Perception.
"They can only afford to put 5% down, so they must not be in as good a spot financially as these other people who can afford to put 20% down. The 5% people might have some financial hiccup that'll keep my sale from closing, but these 20% people are probably a sure bet since they have so much saved up."
Which, of course, is by no means always the truth, but it is the perception.
And no one in the process other than your lender knows your credit score. All the seller sees is that you're doing a 95/5 and they're doing 80/20. That's why it can be especially helpful if you're doing a 95/5 to offer a hefty amount for earnest money. If the norm in your area for earnest money is $1k and you put down $5k, they know you're serious, 95/5 or no.
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As others said, having a higher down payment may make the seller think that you will have an easier time financing the loan, won't have FHA repair issues, or won't be able to close b/c unexpected expenses came up.
I also cared who the loan was going to be through. An offer to us from someone getting a loan through our state employee's credit union was stronger to me than one through a random bank. I've closed loans for the credit union and know that their loans close on time, the no name bank, not so much.
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