Putting a Down Payment on a Home? Seek the 20% Solution

home and stacks of money...
ShutterstockA 20 percent down payment on a home can save you a sizable amount on monthly loan payments as well as interest.

Buying a home? If you are, one of the very first questions you'll need to answer is, "how much of a down payment should I make?" The answer: ideally, 20 percent. Granted, it's not easy to save 20 percent of the home's sale price for a down payment, but the benefits can be huge. For starters, you'll avoid paying private mortgage insurance (PMI), and your monthly mortgage payments will be lower.

"Saving for a down payment remains the No. 1 obstacle to homeownership for many Americans," said Erin Lantz, vice president of mortgages at Zillow. "To qualify for a conventional mortgage, you need to have a down payment of at least 5 percent of the purchase price. However, putting less than 20 percent down can have significant financial implications. Not only could a 20 percent down payment save you hundreds of dollars on your monthly payment, but you'll build equity in the house more quickly and save a considerable amount of money on interest."

Learn more about the benefits of a 20 percent down payment below.

CORRECTION, 6/4/14: An earlier version of this graphic listed an incorrect amount for savings over the lifetime of the loan. The figure has been adjusted below.

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wllthompson8

most people should rent until they can make a decent down payment .young people thing they are loseing ground by renting ,actually their gain in equity is less than gain in cost when they buy with to little down .
the big problem as usual is goverment promoteing home ownership ,with no equity to people who can't afford it ,so they default .

May 31 2014 at 10:31 AM Report abuse rate up rate down Reply