How Much Should You Put Down on a House? A Practical Planning Guide
A down payment is one of the largest decisions in a home purchase, but the biggest possible down payment is not automatically the best choice. A useful target balances a lower loan amount with enough cash for closing, moving, repairs, and emergencies. What a down payment changes A larger down payment reduces the amount borrowed. That usually lowers the required principal-and-interest payment and reduces the interest charged over the life of the loan. It can also improve the loan-to-value ratio, which may affect mortgage insurance and pricing for some loan programs. The effect is not limited to the monthly payment. Cash used at closing is no longer available for a roof repair, an appliance replacement, a job transition, or another emergency. Compare the payment benefit with the value of keeping a reserve. Budget for more than the down payment The cash needed to buy a home may include closing costs, prepaid interest, initial escrow deposits, inspections, an appraisal, moving expens...