Many prospective homebuyers wonder how much money they should plan to have for a down payment on their home. Here’s some advice on finding an amount that works for you:
How Much Should I Put Down?
The simple answer to this question is to put down as much as you can afford without overextending yourself financially. Homeownership comes with many “hidden” costs, from property taxes to homeowners insurance to emergency repairs. Plus, once you own a home, you’ll want to redecorate. All of these costs can add up to hundreds (or thousands) of dollars more than you planned.
What Down Payment Options Are Available?
For those looking for a low down payment, 3% and 5% down payment options are available for many conventional loans. FHA loans can be a great way to purchase a home with a low down payment, as the minimum down payment requirement is only 3.5% of your mortgage amount. VA loans, which are available for eligible military veterans, have a zero down-payment option for certain loans. USDA loans, which are available for housing in rural areas, have a zero down-payment option as well.
For conventional loans, if you can contribute a larger amount to your down payment, you’ll have lower PMI (Private Mortgage Insurance) payments. You’ll need to make these payments until you’ve paid off 20% of your mortgage amount. You can avoid having to make PMI payments by putting 20% down when you purchase your home. This option works for some homeowners, but many choose to make a lower down payment and have PMI payments.