Deciding On How Much Money You Should Put Down On Your New Home

Dated: 10/21/2015

Views: 1101

How Much Should You Put Down?
 
Your down payment plays a huge role in financing your home purchase.  The amount you are able to put down affects not only the lenders’ decision, but the size of your monthly payments and the amount of cash that you will have available for other home buying costs.  Most first time buyers put anywhere from five to twenty percent down on their first home.
Most lenders require that the loan be guaranteed.  You can do this with a twenty percent down payment, which shows the lender you are able to save money, you will have more at stake in your home thus you are less of a risk.  Although most lenders are insured against foreclosures, it is still costly in both administrative costs and insurance premiums.
The larger the down payment, the lower the monthly payments and the overall cost of the loan.  Since the down payment directly affects your loan (purchase price – down payment = loan amount), it also affects the monthly payments on your loan.
If you are not in a position to put twenty percent down there are both government programs (such as VA, FHA, or Fannie Mae) as well as commercial programs available.   When you buy a home, you will be required to pay closing costs.  Consider insurance, taxes, regime fees, etc. as additional cash you will be required to provide in addition to your down payment.  The fees associated with obtaining a mortgage and transferring title can cost as much as five percent of the loan amount.  
 
DOWN PAYMENTS

How they can affect your monthly payment? (4% interest rate before taxes & insurance)
 
                                          10%              20% 
 Purchase Price       
$100,000       $100,000
 Down Payment        
$10,000         $20,000
 Loan Amount           
$90,000         $80,000
 Monthly Payment     
   $505              $382

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