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How Much Money Do I Need for a Down Payment on a House?
Dated: November 26 2020
You’re seriously thinking about buying your first home—probably one of the biggest financial transactions a person may make. But how much money do you need for a down payment? Here are four facts to know.
1. Lenders prefer that you pay a down payment of at least one-fifth of the cost of the home, and they usually won’t lend more than 80 percent of its appraised value.
2. If you’ve got great credit or if you qualify for certain loan programs you may be able to get a loan with less than 20 percent down, or even with no down payment at all, but you may be required to pay private mortgage insurance (PMI).
3. If the lender considers you to be a borrower that presents a high risk because of your credit history, or other factors, they may require a larger down payment before they approve your loan.
4. If you have the money you can always put more than 20 percent down on the cost of your potential new home. The larger the down payment the smaller your mortgage and monthly payments will be.
A simple mortgage calculator can be a helpful tool during your search for a new home. There are many free online mortgage calculators and mortgage amortization schedule calculators. Mortgage calculators estimate your monthly mortgage payment, and amortization schedule calculators show how much money you’ll pay in principal and interest over time. These two tools can help give you an understanding of how your monthly house payment will impact your finances.
And it’s always a wise move to establish a budget before you begin to look for homes so you don’t end up falling in love with a property that you simply cannot afford.
Chip is the IT Manager for Alex MacWilliam Real Estate. He handles the technology needs of the company as well as helping agents in their day to day problem solving.....
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