Michael laid out what our down payment options were: If we had enough for 20% down, we could finance without mortgage insurance; if we put less down, our lender would require us to get it.
Here are some other considerations Michael gave us.
20% or more down
- Pro: The larger your down payment, the lower your monthly mortgage payment
- Pro: Your lender will not require mortgage insurance — that’s one less expense each month
- Con: It may take you longer to save up your down payment
- Con: By the time you’ve saved up for a down payment, the home you want to buy may not be on the market or its price may have increased
So, for example, a 20% down payment on a home priced at $150,000 would be $30,000.
Less than 20% down
- Pro: Your savings goal will be smaller, so you’ll need less time to reach it
- Pro: You’ll be able to buy sooner than later
- Con: The smaller your down payment, the larger your monthly mortgage payment
- Con: Your lender will require FHA or private mortgage insurance — an additional expense included with your mortgage payment. (If you finance with private mortgage insurance, typically, you can cancel it once you have enough equity in your home.)
So, for example, a 10% down payment on a home priced at $150,000 would be $15,000; a 5% down payment would be $7,500.
