How Much Should First Time Home Buyers Put Down?

Previously, you could expect a lender to require you to pay up to 20 percent down before they would finance your purchase. These days, this isn’t true anymore. From government programs to lenders offering unique financing, you can buy by putting next to nothing down. Many people jump on such financing without asking the fundamental question of whether doing so is a good idea.

The vast majority of borrowers do not put 20 percent down. It is no secret home prices are high these days, so it is important to consider all financial aspects of buying a home and determining which route is the best one for you and your family to take.

How Much Should I Put Down As A First Time Home Buyer?

This is one question that can plague the minds of potential home buyers. There are benefits to both putting a small down payment and a large down payment against your new home loan. A small down payment will, of course, leave a larger mortgage for you; a large down payment will make a smaller mortgage.

If you put a lower down payment, you can invest the extra money somewhere else – like home improvement repairs, moving costs, or furniture and decor. There are obvious benefits to both options, but you may not know what those are right away.

There are factors to consider when deciding the amount to put down.

  • If you are thinking about putting a small down payment and investing elsewhere, then you need to calculate how much your investment will yield. If your investment yields less than the interest rate of your mortgage then it may not be a good idea.
  • You can be profitable if you plan right and make the right decisions. Also, if you are not likely to invest your money, then you need to put as much money as you can into your mortgage.
  • Also, if you have any debts, then you may want to consider a smaller down payment and paying off those smaller debts. Paying off smaller debt actually makes individuals feel more accomplished and better budget their remaining finances.
  • If keeping your monthly costs down is a big deal to you then you should make the largest down payment as possible. A larger down payment can encourage a smaller interest rate, and if you put enough down, can eliminate private mortgage insurance.

The fact of the matter is that it all depends on how much you want your monthly payments to be. If a low monthly payment is not that big of a deal for you, then it can even be beneficial to you to make a small down payment.

As you can see, there are a lot of different factors that have to be weighed in when you are making the down payment decision. You should factor in all of these options that are here. As this is one of the greatest decisions of your life, it is good to go in with as much knowledge as possible.