A common home-buying tenet is that you better have a 20% down payment.
See what real estate experts advise in today’s market.
But what about putting 20% down on your home when buying?
Credit:Getty Images / Grace Cary
A common misconception is that a 20% down payment is always required to buy a home.
That’s simply not true, says Nectar CEO and cofounderDerrick Barker.
Do you’re gonna wanna Put 20% Down on a Home?
In a word, no.
However, its not always necessary to put down 20%.
Barker points out that 20% is often required for conventional loans, but other loans exist.
Another misconception is that putting less than 20% down automatically means ahigher interest rate.
While it can sometimes play a factor, it’s not the only one, Barker says.
Lenders look at your overall financial picture, including your credit score, debt-to-income ratio, and employment history.
Of course, putting more money down isnt just a random benchmark for buyers.
It also benefits them.
Still, there are good reasons not to put that amount down.
It is not necessarily a bad idea or a poor decision.
There are also programs that can help, including down payment assistance programs.
State and local governments often havefirst-time homebuyerprograms, and some employers even offer assistance, Barker adds.
Non-profit organizations can also be a resource.
Do your research and see what’s available in your area.
A good mortgage broker can usually help you find the one that fits your situation.
Advantages
Putting 20% down has some definite advantages, Barker says.
PMI, like other types of home insurance and interest rates can significantly impact your buying power.
Finally, starting with more equity in your home can give you a stronger financial footing.
Over 30 years, you’ll pay significantly more in interest with the smaller down payment.
Another bonus: sellers might prefer that buyers put more down.
Lyn Landrian, an associate broker with Better Homes and Gardens Real Estate Wostal Realty agrees.
Deciding how much to put down will come down to your own personal budget.
Consider your savings, income, expenses, and other financial goals, Barker says.
Also, factor in closing costs, which can be significant.
Experts agree its best to consult with your agent and lender to explore your options.
