How Much to Put Down on a House?

When people consider buying a home for the first time, one of the biggest questions they have is how much money should be put into the down payment on a house. This number varies with the type of mortgage the person wants and how much he or she wants to pay in monthly payments.

One of the biggest things to consider is the amount of interest that has to be paid back on any mortgage. The more money a person puts down on the home, the less money has to be borrowed. The less money that has to be borrowed, the lower the monthly payments and the less interest that has to be paid.

While some may interpret this as “put down everything you have,” it’s really not. Putting down everything a person has on a home does not leave a whole lot else available for closing costs. Homes purchased with conventional mortgages and less than 20 percent of the purchase price down will have to have Private Mortgage Insurance (PMI). This is to cover the lender’s loss in case the buyer defaults on the loan. PMI payments continue until 20% equity is reached.

The lower the interest rate is, generally the better. Putting more money down on a home might secure a lower interest rate. This makes sense if a person is planning on living in the home for a while. If a person is not planning on living in the home for any real length of time, putting more than 20% down does not make a whole lot of sense because it will not save that much interest over the length of time the individual is paying for the home.

Contact an Austin Real Estate Agent

If you are considering buying a house in Austin and would like to see some of the best properties the city has to offer, contact the Austin real estate agents of The Carvajal Group at 512-419-7770.