How big should I make my downpayment?

Above 20 percent, extra down payment buys you almost nothing, and below 20 percent the mortgage insurance question has a legal expiration date that most buyers do not know about. Once you know both of those, your cushion worry answers the question for you. Start with the part people get wrong. Under the Homeowners Protection Act of 1998, private mortgage insurance must terminate automatically once your loan-to-value reaches 78 percent of the original value on the original amortization schedule, as long as you are current on payments. And you can request cancellation in writing at 80 percent, subject to a good payment history and the lender potentially asking you to show the value has not declined and there are no second liens. So PMI is not a permanent penalty for putting down less than 20 percent. It is a temporary line item with a statutory end date that arrives on a schedule you can look up before you even close. Ask your loan officer to print you the amortization schedule with the 78 percent date circled. Seeing that date changes how the decision feels. Which reframes your actual question. Dollars above 20 percent are not solving a mortgage insurance problem, because there is no mortgage insurance above 20 percent. They are buying you a smaller balance at your note rate, and that is all. That is a real but modest benefit, and you are paying for it with liquidity. Your cushion worry is the correct worry, and I would let it win. Here is the number I would fund before deciding on any down payment percentage: - Six months of the full new payment, meaning principal, interest, property taxes, homeowners insurance, and any association dues, sitting liquid after closing. - Your homeowners insurance deductible, in cash, separately. - Roughly 1 percent of the purchase price per year set aside for maintenance. On a $350,000 house that is about $290 a month, and it is not optional, it is just deferred until something breaks. Fund all three first. Whatever is left over is your down payment. If that lands at 12 percent instead of 22, that is a fine outcome, and the PMI comes off on the schedule anyway. The reason I would not stretch: a dollar in your down payment can only come back out through a sale, a refinance, or a home equity line. If the water heater goes in month four and you are house-poor, you will be borrowing at HELOC rates for money you had in your hand at closing. That is the one-way door, and it is the mistake I see most often with buyers who tried to hit a percentage. One more thing, since the thread mentioned recasting. If you do land a windfall a year or two in, ask your servicer whether they will recast the loan. A recast re-amortizes the balance after a lump sum so your monthly payment actually drops, without a new loan or new closing costs. Most servicers will for a modest fee, but you generally have to ask for it by name, and it is a much better tool than making extra principal payments if lowering your payment is the goal. Wisconsin note: get an actual property tax figure for the specific Franklin address rather than an estimate, and get a real insurance quote before you finalize your budget. Those two lines move the monthly payment more than a couple of points of down payment will. I am a real estate professional, not a lender or a financial advisor. Have your loan officer run the payment at three down payment levels side by side, with the PMI amount and the PMI termination date shown on each. That comparison makes this decision in about five minutes. I am Zoltan Peresztegi, and I work in Los Angeles and the South Bay, so Franklin is not my market, but if you want an introduction to a strong Milwaukee area agent, just ask. Zoltan

The right down payment depends on your financial situation and comfort level. While putting **20% down** can help you avoid private mortgage insurance (PMI) and reduce your monthly payment, it's not always the best choice if it leaves you with little or no emergency savings. Owning a home comes with unexpected expenses, so it's important to keep enough money set aside for repairs, maintenance, closing costs, and other emergencies. In many cases, making a slightly smaller down payment and maintaining a healthy cash reserve is the better financial decision. Talk with your lender about different down payment scenarios. They can compare your monthly payment, loan costs, and cash needed at closing so you can choose the option that best fits your long-term financial goals. **Juan Picos** REALTOR® | JohnHart Real Estate Serving Burbank, Glendale & Greater Los Angeles

Hi Jerry, There are so many loan options out there! I think some people psych themselves out of buying because they think they have to have 20% down. That is not the case. Sometimes even if you have that much to put down, it is not advisable to do so. You do not wan to be "house-poor", you want to be ready for home repairs that may come up and you also want to be able to enjoy life ! FHA and VA allow, low to no down payments. Conventional loans can be as low as 5% down .There are special program loans for doctors, attorneys, first-time buyers, military, first-responders, teachers.., and probably others that have down-payments of, typically, 5%, but maybe even less. A recent buyer client of mine got in on a great program for doctors that allowed her to put 5% down. She is planning to update the home she is buying and she also wants to make other real estate investments in the next few years. So keeping her down payment low made a lot of sense. A lot of loans products also allow you recast the loan, which is paying a a chunk down later and then they lower your payment to reflect the amount of principal that was paid. You may want to discuss that with your lender so you know if that is an option, and what rules surround that. This is great for people who may receive large work bonuses or be expecting other windfalls that can be used overtime to lower the mortgage principal and accompanying payment. Mary Wassef Founder/Broker Associate Circa Real Estate Houston Heights Houston TX 77008

The larger your down payment the small your mortgage payment so put down as much as you feel comfortable doing. Keith Jean-Pierre Managing Principal The Dapper Agents Real Estate Operations in ALL 50 States

Common options: 3–5% (low down), 10% (stronger offer/lower payment), 20% (avoids PMI). Choose based on your payment comfort + cash reserves.

That is a very personal choice. In order to make a decision, talk to your lender and get all the information from them of the various scenarios you are considering in order to make an informed decision. In all cases, you should have an emergency fund of at least 3-6 months of expenses kept solely for any unforseen expenses, separate from the downpayment amount. Hope that helps.

Its always best to have a bit of a cushion in case an unexpected issue comes up. The more down the better. If you can put enough down to do a 15 year loan is a huge savings over the span of the loan.

THIS IS a GREAT QUESTION! As a REALTOR I have seen very smart local lenders actually tell my clients to not put as much down because they may not be staying in a home as their forever home for more than 5-8 years and it does not make sense to put more money down when you can take that money and invest it in other areas for a bigger return! Also, there are recent changes to the lending regulations that may actually penalize some that are borrowing money because it could make your rate higher if your credit score is in a higher bracket. A good Local lender can give you specifics about these options based on the loan type and the amount that you are looking to finance and your credit score! So reach out to a good local lender to determine the best options.