Down Payment Sweet Spot | Survey: 53% of Americans Prefer 10% Here’s What They May Be Missing…
DOWN PAYMENT PREFERENCES AND HOW THEY INFLUENCE THE COST OF A HOME
While affordable housing programs allowing a 10% down payment are available and appear to be an attractive option to prospective home buyers, it’s important to consider factors like private mortgage insurance (PMI), which can play a significant role in the overall cost of a home. In essence, the lower your down payment, the higher you can expect your private mortgage insurance costs to run (with your credit score also playing a major role).
Private mortgage insurance can add a substantial sum to your monthly costs. This is typically a few hundred dollars. So, putting down 20% may be more ideal for avoiding additional expenses. In that case, the bank is only taking on 80% of the risk, and so they will likely not require you to purchase extra insurance.
About 60 percent of home buyers put 6 percent or less down on their home purchase, according to data from the National Association of REALTORS®. Considering the median existing-home price is $258,300, a 6 percent down payment would be $15,498.
Some aspiring buyers may be unsure of how to come up with that amount. But there are plenty of seemingly simple things they can do to start saving. NAR offers the following infographic.