Should I use $3k towards a down payment or to pay down my interest rate?

Latoya asks: Is it better to take the $3,000 that I was going to put down on a home and use it toward rate buy down? My interest rate would be 2%. The mortgage is for $139,000 and my rate would be 4.5% if I did not buy down the rate.

The decision to buy down your interest rate (also called buying points) depends on how long you plan to own your home. The longer you think you’ll own your home, the better it is to buy down your rate rather than pad your down payment.

Using a mortgage points calculator, I calculated that you could save roughly $28,000 on interest payments if you buy down the rate. So it definitely seems like a good deal.

The big question is whether that $3,000 is your only down payment. If so, you need to find out if your lender will approve your mortgage without a down payment.

Good Luck!

David @MoneyUnder30