 TITLE: How Much Should I Save for a Down Payment? CONTENT: How Much Do You Need for a Down Payment?\n----------------------------------------\nThe more cash you put down, the smaller the loan you'll need and the less interest you'll pay. Plus, lenders like to see down payments of 20%, since it may demonstrate that you have strong cash flow and the ability to save consistently over a period of time.\nBut in reality, a 20% down payment is often difficult for homebuyers to come up with—and may not even be necessary.\n### Do You Need to Have a 20% Down Payment?\nLet's start with the benefits of a higher home down payment, which are substantial. With 20% down, you'll have access to:\n*   **A cleaner path to loan approval**: You increase your chances of mortgage approval with a bigger down payment, as lenders will likely view you as a good saver, and thus a lower credit risk.\n*   **Lower mortgage rates**: Since a higher down payment reduces your loan-to-value ratio, or the loan amount compared with the home's value, you can usually get lower interest rates from lenders. Any hike in the amount of a home down payment lowers loan-to-value ratio while also reducing risk to the lender.\n*   **You'll likely pay off your mortgage sooner**: The more cash you can put down, the lower your loan amount. That makes it more likely you can pay off your entire mortgage sooner, saving you interest and letting you build equity more quickly.\n*   **A lower monthly mortgage payment**: A larger home down payment cuts your monthly mortgage bill, leaving you with extra cash for other financial considerations, like college or retirement savings.\n*   **No mortgage insurance**: By steering more cash into a home down payment, you can avoid paying private mortgage insurance (PMI). When you put less than 20% down, your lender will likely require you to pay PMI, which it may charge as an upfront free or as part of your monthly payment. This protects the lender if you can't pay your mortgage. Private mortgage insurance can be pricey—up to 1% of the entire loan amount on an annual basis, in many cases. On a $200,000 home loan, that means almost an extra $200 per month saved by not having to pay PMI.\n#### What Is the Average Down Payment?\nDespite the advantages of making a down payment of 20%, it's common for buyers to put down less. The median down payment among all homebuyers in 2018 was 13%, according to the National Association of Realtors. First-time buyers put a median of 7% down. Repeat buyers put down the most, at 16%.\n1 Realtor.com, 2 NAR\n#### What Is the Minimum Down Payment?\nWhile down payment obligations vary from lender to lender, and primarily depend on your credit health and debt-to-income ratio, most traditional loans require at least 5% down.\nHomebuyers, especially cash-strapped first-time buyers, have additional options, though. For example, conventional loans are available through traditional lenders for less than 5% down. U.S. Federal Housing Administration (FHA) home loans are easier to get than traditional loans and require the borrower to put down only 3.5% of the home's value. If you're a veteran or service member, you could pay 0% down and no private mortgage insurance for a home loan through the U.S. Department of Veterans Affairs.\nPlus, many states and municipalities have first-time homebuyer programs that provide down payment assistance. Contact your state's housing finance agency to find out about programs in your area.\nWhen you're considering the minimum down payment you're willing to make, think through whether putting less down is a reflection of your readiness to buy a home. While it's possible to obtain a loan with little to nothing down, you should still have savings on hand before purchasing a home and the income to pay your mortgage as well as the other costs of owning a home. Using money from your retirement savings or your emergency fund for a down payment or ongoing expenses is a sign you should spend more time saving to prepare yourself for buying and owning a home. END