Down Payment | Calculator
Down Payment:
A down payment is a portion of the purchase price of a home that you pay upfront as a good faith gesture to secure the loan. In exchange, the lender will provide the remaining amount needed to purchase the property.
The down payment can range from 3% to 20% or more of the purchase price.
The higher the down payment, the lower your monthly mortgage payments and interest rate may be.
A larger down payment also reduces the likelihood of private mortgage insurance (PMI) requirements.
Types of Down Payments:
Cash Down Payment: Paying the full amount upfront with cash.
Conventional Down Payment: Typically 3% to 20% of the purchase price, depending on the lender and loan type.
VA (Veterans Affairs) Loan Down Payment: Zero down payment for eligible veterans.
USDA (United States Department of Agriculture) Rural Development Loan Down Payment: Zero down payment for borrowers purchasing homes in rural areas.
Benefits of Making a Large Down Payment:
Lower Monthly Payments: With less borrowed money, your monthly mortgage payments will be lower.
Lower Interest Rate: A larger down payment can qualify you for a better interest rate.
Reduced PMI: If the down payment is 20% or more, you may not need to pay private mortgage insurance (PMI).
Increased Equity: A larger down payment means you’ll have more equity in your home from the start.
Drawbacks of Making a Large Down Payment:
Tying Up Equity: Putting a large amount of money into a single asset can leave little room for liquidity or other investment opportunities.
Opportunity Cost: Using a large down payment to purchase a home means you may miss out on other investment opportunities with potentially higher returns.