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How Much of a Down Payment You Really Need to Buy a House

While most who rent would love to purchase their own home, many avoid doing so because they think home buying requires a down payment they simply cannot afford. While it is encouraged to save as much money as possible, you can buy a house with a relatively low down payment in a lot of instances.

Before purchasing a home, it is helpful to know the approximate price of the down payment. Although every home buyer has a different experience and there are a number of factors that play a role, the following is a general overview about what to expect from the down payment when buying your first house.


A Down Payment Overview

A down payment is the amount of money you put forward when purchasing a home. The payment is credited towards the home purchase, which means the remaining cost of the home is lowered. The larger the down payment, the less the monthly payments on the mortgage is likely to be. The down payment is calculated through percentages in many instances. While some may only pay as little as five percent, others might pay a twenty percent of the cost of the home in the down payment.

The 20% Rule

A generally good rule to follow when determining how much you should ideally put down for a home is twenty percent of the home purchase price. Of course, this is the high end of the spectrum, and you can most often put less down, budgeting twenty percent helps ensure you are prepared for any unexpected costs along the way. For example, let’s say you purchase a home for $150,000. It is most beneficial to be able to put $30,000 down upon signing. With that said, you can purchase a home in many instances for as little as 3.5 percent as the down payment.

Factors That Affect The Down Payment

There are a number of factors that might play a role in how much you can expect the down payment to be, not the least of which is the type of mortgage. Some mortgage types – such as an FHA mortgage – only require 3.5 percent down, whereas others might require a higher minimum down payment. In addition, competition may drive the down payment up if other bidders are offering more money up front. You should also take into consideration your personal preference, understanding the pros and cons of a low down payment and one that is higher.

The Bottom Line

Many who purchase a home for the first time find that the down payment is not as much an issue as they anticipated beforehand. While, of course, the more you can put down the better as it can cut interest costs and help lower monthly payments long-term. However, as long as you are able to put at least 3.5 percent down, the down payment should not prevent you from owning your own home.

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