Down Payment on a House: How Much Do You Need?

Share · Whether your lender will require you to pay for private mortgage insurance (PMI). Typically, you'll need PMI if you put down less than 20% of the home's ... SkiptomaincontentLearnAboutMortgages failure GetacallbackfromoneofourlendingspecialistsYourcontactinformation*requiredYourfirstname*InputyourfirstnameYourlastname*InputyourlastnameYourphonenumber*InputyourphonenumberYourZIPcode*  WeaskforyourZIPcodebecauseweneedtoknowyourtimezonesowecancallyouduringtheappropriatebusinesshours.Youremailaddress*  Weaskforyouremailaddresssothatwecancontactyouintheeventwe'reunabletoreachyoubyphone.Ifyou'reconcernedaboutreceivingmarketingemailfromus,youcanupdateyourprivacychoicesanytimeinthePrivacyandSecurityareaofourwebsite.Bysubmittingthisform,youauthorizeBankofAmericatocontactyouatthetelephonenumberoremailprovidedhere,evenifyou’vepreviouslyregisteredonaDoNotCallregistryorrequestedthatwenotsendyoumarketinginformationbyemail.Youagreewemayuseanauto-dialertoreachyou.Youunderstandthatyouarenotrequiredtoconsenttoreceivingautodialedcalls/textsasaconditionofpurchasinganyBankofAmericaproductsorservices.Anycellular/mobiletelephonenumberyouprovidemayincurchargesfromyourmobileserviceprovider.SubmitCancelHowmuchshouldyouputdownwhenbuyingahome?Yourdownpaymentplaysanimportantrolewhenyou’rebuyingahome.Adownpaymentisapercentageofyourhome’spurchasepricethatyoupayupfrontwhenyoucloseyourhomeloan.Lendersoftenlookatthedownpaymentamountasyourinvestmentinthehome.Notonlywillitaffecthowmuchyou’llneedtoborrow,itcanalsoinfluence:Whetheryourlenderwillrequireyoutopayforprivatemortgageinsurance(PMI).Typically,you’llneedPMIifyouputdownlessthan20%ofthehome’spurchaseprice.Yourinterestrate.Becauseyourdownpaymentrepresentsyourinvestmentinthehome,yourlenderwilloftenofferyoualowerrateifyoucanmakeahigherdownpayment.Sohowmuchofadownpaymentwillyouneedtomake?Thatdependsonthepurchasepriceofyourhomeandyourloanprogram.Differentloanprogramsrequiredifferentpercentages,usuallyrangingfrom5%to20%.Theamountofyourdownpaymenthelpsgiveyourlendertheloan-to-valueratio(LTV)oftheproperty.LTVisoneofthemainfactors–alongwithdebt-to-income-ratioandcreditscore–thatalenderconsiderswhendecidingwhetherornottoextendyoucredit.Yourloan-to-valueratioindicateshowmuchyouwilloweonthehomeafteryourdownpayment,andisexpressedasapercentagethatshowstheratiobetweenyourhome’sunpaidprincipalanditsappraisedvalue.Thehigheryourdownpayment,theloweryourloanamountwillbeandtheloweryourloan-to-valueratiowillbe.Here’stheformula:Loanamount÷appraisalvalueorpurchaseprice(whicheverisless)=loan-to-value(LTV)Forexample:Thehomeyouwanttobuyhasanappraisedvalueof$205,000,but$200,000isthepurchasepriceThebankwillbasetheloanamountonthe$200,000figure,becauseit’sthelowerofthe2Youhave$40,000foradownpayment,soyouneeda$160,000loantomeetthe$200,000purchasepriceYourloan-to-valueequationwouldlooklikethis:$160,000÷$200,000=.80Youmultiply.80by100%andthatgivesyouanLTVof80%Ifyourdownpaymentislowerthan20%,yourloan-to-valueratioforconventionalfinancingwillbehigherthan80%.Inthatcase,yourlendermayrequireyoutopayprivatemortgageinsurance,becausethey’relendingyoumoremoneytopurchasethehomeandincreasingtheirpotentialriskoflossiftheloanshouldgointodefault.Keepinmindthatprivatemortgageinsurancewillincreaseyourmonthlypayments.Whenyouconsiderhowmuchtoputdownonyourhome,thinkaboutyourlender’srequirementsandwhatahigheroralowerdownpaymentwillmeanforyou.Isitworthittoyoutopayprivatemortgageinsuranceeachmonthinordertoreceivetheotherbenefitsofhomeownership?OrwoulditmakemoresenseforyoutosaveforalargerdownpaymentandavoidPMI,evenifthatmeanswaitinglongertobuyahome?Knowingthefinancialimpactofeachchoicecanhelpyoumakeyourdecisionwithconfidence.Ifyou’rehavingtroublesavingforadownpayment,youshouldknowthatcertainlendersparticipateinprogramsthatcouldenableyoutoqualifyfordownpaymentassistance.Askyourlenderwhetheryoumightqualifyforoneoftheseprograms.                Readytoprequalifyorapply?GetstartedLearnmoreabouthomeloansFirst-timehomebuyerinformationUnderstandingyourmortgageoptionsReadmoremortgagearticles»ExplorecurrentratesandotherfinancingoptionsonourmortgagehomepageTalktoTalktoyourlendingspecialistyourlendingspecialist:fromyourlendingspecialist:Connectwithalendingspecialist:NMLSID:866.466.0979ScheduleanappointmentChangelendingspecialistFindanotherloanofficertohelpyouwithamortgagerefinance.EnterCityorZIPGoConnectwithalendingspecialist866.466.0979MondaytoFriday8a.m.to10p.m.EasternTimeMon-Fri8a.m.–10p.m.ETSaturday8a.m.to6:30p.m.EasternTimeSat8a.m.-6:30p.m.ETScheduleanappointmentGetacallback layer