What You Should Know About a 20% Down Payment
20% down on a home is usually what lenders prefer you have from potential homebuyers. The more money you put down, the lower your mortgage and monthly payments will be as well as more home equity.
Although, most lenders want 20%, not everyone can put that much down, especially depending on how much the home is.
What you need to know about putting 20% down on a home.
- Less than 20% down payment on a home, you pay more.
Generally, if you’re able to put 20% down or more on a home then it lets the lenders and the sellers know that you’re capable of handling the home loan. Majority of homebuyers don’t even know that it’s the norm to have at least 20% down on a home.
Now, if you were to put less than 20% down, then your monthly mortgage payment will be higher meaning the interests will build up longer due to the increased life of the loan. Also, as a buyer, if you don’t put 20% down, most likely you’ll have to pay for Private Mortgage Insurance (PMI), which helps protect the lender in case of default.
- Majority of Homebuyers Don’t Put 20% Down
Many people are unable to put a 20% down payment, so if you feel discouraged because you can’t make that 20% don’t feel bad, you’re not the only one! According to the National Association of Realtors, the median down payment is 10% of the selling price. As far as first-time homebuyers, the down payment is at 6% which is not much! If you are unaware of options when having a low down payment, FHA, VA, and USDA are all good and can give you a reasonable loan with little down payment or even no money down at all!
- The higher the down payment, the better it is for you!
Both lenders and the seller ideally like to see 20% down on a home, it’s been said that the housing inventory has decreased dramatically each month. It’s also been said that there’s been an increase in lower priced homes meaning more people will bid on the same home. In order to stand out from those other bidders is having a high percentage on a down payment. Sellers will definitely choose a buyer who puts more money down, they know that you’re financially able to pay your monthly mortgage.