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Looking at Luxury residential homes for sale is quite exciting especially for a first-time home buyer. However, one of those big, fat decisions when you buy single family homes is: How much money should you put down?

A decent-sized down payment will reduce your monthly mortgage payments and will protect you from additional costs when you are looking to buy single family homes or low income housing. But hey, maybe you just don’t have the cash.

Here’s the lowdown on down payments:   

Low down payment, higher costs

Make a lower down payment, and you’ll face higher monthly mortgage payments.

come? Several reasons. The first is just simple math: If you put up less money
now toward the price of the house, you’ll need to borrow more and will have
more of the cost to pay off.

loans with lower down payments usually come with higher interest rates.

Finally, a big reason is something that’s often dreaded called private mortgage insurance, or PMI. 

Benefits of a 20% down payment 

love it when you can make a 20% down payment, because that makes the mortgage a
good risk. The lender believes it would have no trouble recouping the other 80%
if you ever default on the loan and fall into foreclosure. 

Calculate what your monthly mortgage payment would
be with a 20% down payment.

If you don’t want to put that much money down, the lender make you buy PMI. It’s insurance that pays off the loan if you ever stop paying. PMI can be expensive, and the premiums are tacked onto your mortgage payments. If you are going to be getting home insurance you should also get some for your car, for the top auto insurance see here.

types of mortgages — including VA loans — allow for low
down payments with no PMI.

Risks of a higher down payment

making a high down payment isn’t necessarily the smartest choice. 

big chunk of money will be tied up in your home. You won’t have an easy way of
getting at that money if you’re suddenly slapped in the face with a major
unexpected expense and don’t have an emergency fund to deal with it. 

you make a hefty down payment, there’s also a chance you could lose that money

you’re ever foreclosed on, the down payment will never be returned. Or, if you
have to sell the home for less than you paid, you might not recover your down

What should you do?

Personal finance is just that: personal. There is no right or wrong answer to how much of a down payment should be made.

Published in MoneyWise by Doug Whiteman, 03/18/2019