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How much money should you put down on your home?

You may be wondering how much money should you put down on your home. Gone are the days of buying a home with no money down. Most banks want some sort of down payment to secure the loan. The down payment is paid upfront and taken off the purchase price. Many banks require about 20 percent down to utilize a conventional mortgage and secure your new home. Depending on one’s credit rating, the down payment request could be more. However, while 20 percent seems to be a good place to start, it’s not always the price that you should put down on your home. The down payment will not only affect how much you have to borrow, but it will also affect your monthly mortgage payment.


If you don’t have the required 20 percent to put down on the loan, it doesn’t mean you won’t get a mortgage. However, it does mean that you will have to pay PMI, or Payment Mortgage Interest. Some lenders will allow buyers to take out a second loan to cover a portion of the down payment. PMI is an insurance policy that protects the home up until that 20 percent requirement is met. The PMI will no longer be required once a certain amount of equity is built up.


The more money that you have to put down, the better the loan you can get. Typically, conventional loans are by far the best type, as they are fixed for 30 years. An adjustable rate, or ARM, is typically reserved for those who don’t have a large down payment and those who have less than perfect credit scores. The ARM loan works for some people, but it can get others in trouble. It is based on the current interest rate and is flexible. The payment can go up or down based on the economy. Getting into a 30 year fixed is often the best way to go.


Lenders are more confident when people put more money down. That’s why they offer those with larger down payments better interest rates. Looking from the lender’s point of view, they may feel that there is less risk involved when borrowers contribute larger down payments. These borrowers appear to be more settled and financially sound, which means they may be eligible for a lower interest rate.


If you wonder how much money should you put down on your home, the answer is as much as you can. The golden number is 20 percent. You need to put at least this much down to be able to get a good interest rate and a decent mortgage. If you don’t have this much to put down, hold off on buying until you do. If you have more that you can put down, by all means do. The more you put down on your loan, the better the terms. That lower payment will be appreciated for the next 30 years.

Have a question about home-buying? Find a helpful mortgage lender near you to answer any questions you may have about the process.

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