Should You Really Put 20% Down on a Home?

One of the most common questions I get from buyers (especially first-time buyers, or people who haven't bought for many years) is this:

"Don't I need to wait to buy until I've saved a 20% down payment?"

The answer could be yes or no, depending on your personal goals.

Here are some of the?PROS?to saving a 20% down payment:

• The bigger the down payment, the smaller your monthly mortgage payment will be.?
• Putting 20% down lowers your chances of needing private mortgage insurance (PMI), which means you won’t have to add more dollar signs to your monthly home costs.?
• The more you put down on a house, the lower your home loan insurance rate will be which means you’ll save more money over the lifetime of your loan.?

That all sounds pretty great, right? If you have the desire to put down 20%, by all means, do it! But in many cases, waiting to buy until hitting that 20% marker means not being able to buy a house for quite some time. There are many circumstances where saving for a 20% down payment isn’t the best course of action.

Here are some of the?CONS?to saving a 20% down payment

• If you have to pay rent while saving for a down payment, it might not be worth waiting. It may make more sense to have a smaller down payment so your money can start going towards building your own financial future, rather than going into your?landlord's pocket.
• Mortgage interest rates are projected to increase, so?it may be worth buying sooner rather than later to lock in the best rate
• Last, it’s always important to have an emergency fund when moving into a home. Putting less on a down payment so you can have a financial cushion makes more sense for a lot of buyers.?

As always, don’t hesitate to contact me or give me a call if you have questions about our local Monterey Bay area real estate market. I’d love to catch up with you and help answer any questions you have!