First Time Home Buyer's Down Payment

Buying a first home is one of the most exciting, most terrifying, and most amazing experiences a person has. Owning a home is the traditional American Dream, and it’s also something many see as a good investment. The real estate market is ever-changing, but this doesn’t mean it’s not a great investment to purchase a home and put money into the market. However, not all first-time buyers believe they can afford a new home. There is the matter of a down payment, which is often more than buyers can afford. Fortunately, there are options out there even if someone doesn’t think buying is in the cards. It helps for potential buyers to understand everything there is to know about first-time homebuyers and down payments.

Recommended

The recommended down payment on a new home is at least twenty percent of the purchase price. For example, if a house is listed for 300,000 dollars, the buyer should have sixty thousand dollars to put down, leaving a financed amount of 240,000 dollars. This allows buyers to forgo paying private mortgage insurance, known commonly as PMI. Private mortgage insurance is expensive, and no one wants to pay. It can be as much as one percent of the entire loan amount annually. Lenders require buyers to pay PMI if they finance a home for more than eighty percent of the value, which means a 300,000 dollar home without a down payment could cost a buyer as much as three thousand dollars per year, which breaks down into an additional 250 dollars per month added to the mortgage payment. It’s unaffordable, but lenders are hesitant to give buyers money without a down payment to provide some equity in the home.

Continue reading to learn about the typical amount families will put down on a home.