How Big Should Your Down Payment Be?

Deciding how much you want to put down on a home is a tough choice. There are advantages to large and small down payments.

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Should you put down as much money possible on your next home purchase, or should you put the minimum amount down? This is a tough question to answer and there are benefits to both strategies. Here are the arguments for each of them.

Let’s say you have the money on hand to put 20% down on your home purchase. If you do that, you won’t have to pay the private mortgage insurance that you will have to pay if you put less than 20% down. Hitting that 20% mark will also ensure that you get the best mortgage interest rate possible.

If you simply can’t afford a high down payment and instead choose to put down 3% or 3.5%, you’re going to get a better rate of return on the money you’re investing. You are also able to take that money that you don’t use on the down payment and invest it in another vehicle. One thing I know for sure is that you shouldn’t clean out your savings to buy a home. You always want to have a backup plan.

Don't blow your savings on a down payment!

When you’re thinking about buying a home, you need to sit down with a mortgage professional who will ask you the important questions that will determine what kind of loan you qualify for, the mortgage rate you’ll receive, and what your monthly payment should be.

If you need a recommendation for a great lender, we’d be happy to provide you with one. If you have any other questions about buying or selling a home in the meantime, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.