How Much Should You Put for a Down Payment?

Learn About How Much Should You Put for a Down Payment!

As many homebuyers know, purchasing a new home is an incredible task–especially if it’s your first time. Not only can it take plenty of time to save money for a house, but finding the right home isn’t easy either. But did you know that many homebuyers agree that the most challenging part of the home-buying process is making a down payment? In case you don’t know, a down payment is a portion of the total home price you pay out of pocket before financing the rest with a mortgage. While that can sound difficult, you could benefit from setting a clear goal on your down payment.

However, you may wonder, “How much should you put for a down payment?” The answer to that question isn’t as clear-cut as you might hope, but there’s an intelligent way to decide how much you can put down.

Read below for some ideas you can take to decide the amount of money you should put for a down payment.

How Much Should You Put for a Down Payment on a House?

You may have heard how many lenders require homebuyers to put a 20% down payment on their homes. It’s understandable to be worried about that price since it can be a massive cash total to spend! Yet, you’re not obligated to put down that amount! In fact, several first-time buyers pay about 6%-7% of their home price, while repeat buyers put down only 13%. The truth is that the amount you should put for a down payment depends on your mortgage, lender, and the type of house you’re looking for.

The 20% down payment might seem like a large amount, but it might be the smartest way to cover that installment. For example, you could benefit from making a large payment if you have a considerable amount of money in your savings account but have a low income. Why? Because making a large payment can help reduce your loan amount and decrease your monthly mortgage payments. In other instances, a 20% down payment can also lower your payments with Federal Housing Administration loans; if you make a large down payment, your FHA mortgage insurance premium(MIP) can drop significantly. That can help you save plenty of money each month and throughout the loan duration.

Is There a Drawback From Making a Large Down Payment?

It’s understandable to wonder if a 20% down payment has a downside after reading how it’s smart to do so. Unfortunately, there are some drawbacks to consider when making such a large down payment. For example, once you make a significant payment on your mortgage, it might not be simple to get it back. That means you’re at a financial risk if you don’t have enough funds to pay for an unexpected bill or expense. It can be worse whenever you buy the house and don’t have the money to cover an urgent repair.

In addition, waiting to save enough money for a 20% down payment can lead to a big opportunity cost when you have to pay monthly rent. You might save time and money if you buy a house now instead of paying rent while saving up for a 20% down payment. In that instance, you could benefit more from making a smaller down payment.

Is There an Ideal Amount You Should Put for a Down Payment?

The answer to that question is no! Remember, the amount you’d spend on a down payment depends on your finances, lender, and the home you plan to buy. Just take an introspective look at how a down payment can affect your monthly mortgage payments. Once you determine a beneficial down payment amount, you can select a home that fits that standard.

Speaking of purchasing a home, you can contact Realtor Linda Moore if you’re interested in buying a property soon. You can look at different houses in San Diego County until you find the one that’s right for you!