Before you begin the home buying process, it’s important to understand all there is to know about a mortgage down payment. A down payment is an essential component to getting a mortgage because it helps determine your loan amount and loan terms.
What is a Down Payment on a House?
A down payment is an up-front payment you make towards the total purchase price of a home. Down payments are typically expressed as a percentage of the purchase price. The difference between the purchase price and the down payment is the loan amount.
What is the Average Down Payment for a House?
The average down payment for a house is typically between 10-20% of the purchase price. Understanding how much you can afford to put down on a home may help you gauge how much house you can afford.
GuardHill offers mortgage programs with little to no down payment options. Although a lower down payment may require private mortgage insurance (PMI).
How Much Should I Put Down on my Home?
The general rule of thumb is to not spend more than 25% of your monthly income on your monthly mortgage payments. Use our mortgage calculator to input different scenarios regarding varying monthly payments in relation to different down payment amounts.
Remember, monthly mortgage payments may include:
- Homeowner’s insurance
- HOA fees
How Should I Save for a Down Payment on a House?
It is crucial to start early when saving for a down payment on a house. The following are some helpful tips to help you start saving:
- Set up a timeline to help you reach your savings goal
- Start paying off other debts
- Put saved money aside in an interest-bearing account
- Set up automatic monthly deposits into a savings or investment account
- Cut down on unnecessary expenses
Remember to stay consistent and disciplined to help you reach your down payment savings goals.
What if I Can’t Afford a Down Payment on a House?
Many young homeowners, especially first-time homebuyers, use a cash gift (also known as a down payment gift) to help with a down payment on a house. If you’re struggling to save up enough for a down payment, a gift may be a great option for you.