Do I really need a 20% down payment on a house?
The idea that you need to put a 20% down payment to purchase a home is a myth. For many young Americans who are struggling with paying rent and student loans, saving 20% for a down payment can be a huge barrier to homeownership. It can take years to save that much money, especially in the cities where home prices are higher than average.
These days, the practice of putting down less than 20% to secure a mortgage is more common. Depending on your state and mortgage, you may only need to put down 3%.
However, putting down 20% on a mortgage ensures that you won’t pay private mortgage insurance (PMI) and can help you secure lower interest rates. For those who do not have 20% to put down, banks will charge PMI to borrowers to gain some protection in case the borrower stops making mortgage payments. PMI can cost 0.2 to 2% of the loan’s principal balance.
When it comes down to it, there’s no “right” down payment amount since everyone’s situation is different. It mainly depends on your finances and the home you plan to purchase. If you have further questions about buying a home, contact a trusted real estate professional.
Sources: Businessinsider.com, Themortgagereports.com, Keepingcurrentmatters.com
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
