The idea that you should put 20% down on a home is one that has been the "gold standard" for years. After all, when you put 20% down, you avoid paying for private mortgage insurance, and you'll have a smaller loan amount with lower monthly payments. It's something that could save you a lot of money in the long run—but there's also a catch.
Not everyone can easily afford 20%, especially with home prices having risen at a record pace over the last few years. So, what should potential buyers do? Let's explore the pros and cons of putting 20% down on your next home purchase.
Let's start by talking about the financial benefits of putting 20% down. In most cases, if you can afford it, it makes good financial sense to put down as much as possible when buying your next home. By doing this, you can avoid paying for private mortgage insurance (PMI), which can add hundreds or even thousands of dollars to your monthly payments each year.
Additionally, since your loan amount will be lower with a larger down payment, you may qualify for more favorable rates and terms. Last but not least, this will reduce your overall loan balance over time which could lead to significant savings in interest costs over the life of the loan.
Of course, there are some downsides to putting 20% down as well. For starters, not everyone can easily afford such a large sum upfront. Putting down such a large amount can leave some buyers "house poor" afterward with no money left over for renovations or furniture purchases, or other unexpected expenses related to owning a house.
What's more, if you're looking to purchase an older home that needs repairs or improvements right away (or even in the near future) then having extra cash on hand is always beneficial – even if it means taking out PMI and increasing your loan balance slightly to do so.
At the end of the day, whether or not putting 20% down is right for you depends entirely on your personal circumstances and financial situation. If you have enough saved up where it won't leave you feeling "house poor" afterward, then going with a larger down payment may be a wise decision; however, if doing so would drain your bank account, then it might make more sense financially to go with less than 20%.
As always, seek advice from your local mortgage professional to get the full picture before making any final home financing decisions.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 224179
Christiansted, VI 00820
Phone: (340) 778-4444
Schaffer Mortgage Corp strives to ensure that its services are accessible to people with disabilities. Schaffer Mortgage Corp has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
Schaffer Mortgage Corp makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows vimortgage.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
Schaffer Mortgage Corp accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
Schaffer Mortgage Corp continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on Schaffer Mortgage Corp website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on Schaffer Mortgage Corp website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: email@example.com