How Much Should You Put Down on a House?

By: Greg McKinney Mineola Texas 

Everyone wants the magic answer – how much money should you put down on a house? Is it 20%? Can you put down less or more than that? 

The down payment isn’t a one-size-fits-all approach. It varies by borrower, loan program, and situation. Here’s what you should know.

 Do you Need a 20 Percent Down Payment? 

The good news is you don’t need a 20% down payment all the time. Is it nice?

 Sure.

But if you don’t have 20% to put down, you can still get a mortgage. A 20% down payment gives you instant equity in your home. It also lowers your risk of default which may allow lenders to give you more attractive financing options.

 If you’re taking out a conventional loan, it also allows you to avoid Private Mortgage Insurance (PMI). But don’t worry, if you take out conventional financing and put down less than 20%, you can cancel the PMI once you owe less than 80% of the home’s value.

How Much Should You Put Down?

First ask yourself, how much money do you have?

Not only should you look at the total amount of money you have saved, but what else you’d need the money for. If you have $20,000 for example, it doesn’t mean you should put all $20,000 down. You’ll need money for closing costs, emergencies, and money to maintain or fix up your home.

Next, look at the mortgage requirements. Here is a basic rundown:

• Conventional loans – 3% down payment for first-time buyers and 5% for subsequent buyers
• FHA loans – 3.5% down with a 580-credit score or 10% with a 500 – 579 credit score
• VA loans – 0% down payment required
• USDA loans – 0% down payment required

 Also, think about how long you’ll be in the home. If it’s a long-term investment, putting more money down now can be beneficial because you’ll keep your payment down. If it’s a short-term purchase, though, investing too much money now may not be worth it since you’ll sell the home shortly and the smaller payment won’t make much of a difference.

Put Down what you are Comfortable Putting Down

Each loan program has its minimum down payment requirement, but beyond that, you should put down what you’re comfortable spending. Don’t deplete your savings as that will only cause financial issues in the future. But put enough money down to give yourself some equity in the home and to get the best rate and terms on your loan.

Final Thoughts

A down payment is an investment in your home. It helps you get the most attractive financing options and gives you some room should you need to refinance in the future to use some of the equity.

The more money you can put down, the better your chances of getting approved, but there are plenty of programs that allow low down payments or even some programs that no require no down payment at all.

 Greg McKinney Mineola Texas