How much should I put down on a house?

If you’re buying a mortgage immediately, chances are you’ve heard tons of opinions about how much you ought to spend on a down payment. Many of us think that the more you'll spend on a down payment the better, but there are some factors at play that could dissuade you from making a huge down payment. Keep reading to learn what it means to put down a small or large down payment on a home. 

Don’t put down 20 percent or more if it'll obliterate your savings.

It’s not the best idea to put an enormous down payment (20 percent or more) if this may cause you to go broke. Don’t withdraw everything to make that down payment. Lenders want to check that you have savings. You should have an emergency fund should there be a change in your life, like the loss of employment. 

Large down payments traffic jam your money

If you make a big down payment, know that an enormous chunk of change is now traffic jammed in this house. If an emergency occurs, it'll be hard to get that cashback. Also, many new homeowners forget all the extras that come alongside ownership: a boiler or furnace that needs replacing, a sudden roof leak, or maybe a replacement refrigerator. Getting money out is not as easy as putting it in! So don't think that more is better. This is something you want to talk about with your bank and your financial advisors.

A small down payment means also paying for PMI

If you would like small monthly payments, however, putting less money down won't assist you do this . Lenders append PMI (private mortgage insurance) if your deposit is a smaller amount than 20 percent. This is an added monthly cost that you must factor in if you decide to put down a small amount of money on your home.

A small down payment means higher mortgage payments

If you put, a smaller down payment on a house it means you'll have to pay a higher mortgage payment monthly. If you take out a huge loan, the rate of interest on that loan will be higher than that on a small loan. If you are thinking about making a smaller down payment, know that things like PMI and higher interest rates are going to be a part of your future.

Look into loans that allow small down payments with no PMI

Government-backed loans just like the VA loan, FHA loan, and USDA loan all allow you to put little or no down, but don’t require PMI. (However, there could also be other forms of insurance.) check out the qualifications before applying for one of these loans – there are income and location restrictions to keep in mind. Deciding how much to put on your down payment isn't straightforward; it depends on the person and therefore the situation. And bank and government policies can change quickly. 

For help deciding how much you ought to pay on a down payment, give us a call today.

Ryan Shilow

Phone: 443.602.9900

Email: [email protected]

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