The amount you choose to spend on a down payment
is an important decision. Your down payment choice affects not just how much cash you
have to bring to closing, but also the overall cost of your mortgage. Understand your options
so you can decide what’s best for you. In general, making a larger down payment will
require more cash upfront, but you’ll have lower monthly payments and your loan will
cost less overall. You won’t be borrowing as much money, so there’s less to pay back.
You’ll also pay less interest, because you’re paying interest on a smaller loan balance.
And if your down payment is 20% or more of the price of the home, you typically won’t
have to pay for mortgage insurance. A smaller down payment requires less cash at closing,
but you’ll have higher monthly payments, your loan will cost more overall, and you’re
more likely to have to pay for mortgage insurance. When deciding what size down payment is right
for you, consider how much savings you will have left after you buy. It’s important
to have some left for emergencies and repairs. Ask yourself how much you can comfortably
afford to pay upfront, how much you can afford to pay each month, and how important it is
to you to save money overall. Ask lenders to show you different down payment options
using real numbers to choose the down payment that’s best for you.