Buy a New Home with a Lower Down Payment
You hear it said often: If you want to buy a house, you must have 20% down. But it’s not exactly true.† In today’s market, many banks will actually accept less than 20% for a Down Payment Down Payment A payment made in cash by the buyer toward the property’s purchase price as part of the terms of the mortgage. A higher down payment can help you lower your monthly payments or qualify for a more expensive home. If the down payment is less than 20% of the purchase price, the lender may require you to purchase private mortgage insurance (PMI). View Glossary Page on a new home. In fact, according to the 2014 National Association of Realtors Profile of Home Buyers and Sellers (source link), the median Down payment Down payment The money the homebuyer pays at the time of closing for the purchase of the home. It reduces the amount financed. View Glossary Page made by first-time homebuyers, purchasing their Primary Residence, was just 6%. While a 20% Down payment Down payment The money the homebuyer pays at the time of closing for the purchase of the home. It reduces the amount financed. View Glossary Page is a great goal, and often allows you to get better Mortgage Mortgage The loan and all the related supporting documentation arranged by the lender for the buyer to purchase a home. View Glossary Page terms, it isn’t a mandatory—and it’s certainly not an easy goal to obtain.
Why do we constantly hear that magic number—20%? Well, without 20% you do need to factor in additional costs for Private Mortgage Insurance Mortgage Insurance Insurance protecting the mortgage lender against loss incurred by a mortgage default. View Glossary Page (PMI) or government insurance, which are usually financed by the Federal Housing Association.