Putting a Down Payment on a Home? Seek the 20% Solution
Buying a home? If you are, one of the very first questions you’ll need to answer is, “how much of a down payment should I make?” The answer: ideally, 20 percent. Granted, it’s not easy to save 20 percent of the home’s sale price for a down payment, but the benefits can be huge. For starters, you’ll avoid paying private mortgage insurance (PMI), and your monthly mortgage payments will be lower.
“Saving for a down payment remains the No. 1 obstacle to homeownership for many Americans,” said Erin Lantz, vice president of mortgages at Zillow. “To qualify for a conventional mortgage, you need to have a down payment of at least 5 percent of the purchase price. However, putting less than 20 percent down can have significant financial implications. Not only could a 20 percent down payment save you hundreds of dollars on your monthly payment, but you’ll build equity in the house more quickly and save a considerable amount of money on interest.”
Learn more about the benefits of a 20 percent down payment below.
CORRECTION, 6/4/14: An earlier version of this graphic listed an incorrect amount for savings over the lifetime of the loan. The figure has been adjusted below.