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Do all mortgages require a high down payment?

No, many mortgage loans don’t require a high down payment. In fact, you may qualify for a loan with a low—or even zero—down payment option.

How much is high?

A high down payment is typically around 20% of the purchase price of the home. That means if you’re buying a home for $200,000, your down payment would be $40,000. Many people don’t have that kind of money available to pay up front for their new home.

What are my low-down-payment mortgage options?

Because it’s difficult to accumulate a high down payment, there are plenty of low down payment options available. Consider the following if you have little to no money to put down:

  • Affordable Housing Loan – Helps first-time home buyers who may have lower income and limited employment and credit history
  • Rural Housing Loan – Helps a home buyer who lives in a qualifying rural area by offering 100% financing options
  • Community Homeownership Incentive Program (CHIP) Loan – Helps qualifying home buyers with 97% financing and waives private mortgage insurance (PMI)

A mortgage professional can discuss these options in more detail with you, and review your personal situation to understand the mortgage loan option that’s best for you.

If I could make a high down payment, should I?

You might consider a high down payment if you have considerable cash on hand, maybe from diligently saving, receiving an inheritance, or selling your previous home. Whatever the reason, there can be several benefits to using the cash for a high down payment.

First, for conventional fixed-rate and ARM mortgage loans, a 20% down payment helps you avoid PMI. PMI is an extra cost that protects the lender in case of default, and adds to the amount you have to pay every month for your home. It’s nice to avoid PMI if possible.

Also with a high down payment, your monthly payment is reduced simply because you’re borrowing less money. This increases your chances of being approved for the loan, and lessens your monthly mortgage obligation.

What’s the downside to a high down payment?

When you unload a large amount of cash, you typically deplete your liquid savings. That’s savings you can easily access, whether it’s for spending, giving, investing, or using in an emergency.

So while there are benefits to putting a lot of cash down, you may find it worthwhile to maintain your savings cushion and financial flexibility.

The bottom line

Don’t feel like you have to make a high down payment on your mortgage, even if you have the money to do so. There are plenty of mortgage options that require a small down payment or none at all. Discuss your situation with a mortgage professional who can guide you to the loan option that’s best for you.

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For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 4.199% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 360 equal payments of $969.30. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.378% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result 180 equal payments of $1,405.34. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 3-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.101% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 36 equal payments of $926.23 and 324 equal payments of $965.82. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 5-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.052% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 60 equal payments of $926.23 and 300 equal payments of $963.40. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates&mdash that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 7-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.020% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 84 equal payments of $926.23 and 276 equal payments of $960.90. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 10-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.110% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 120 equal payments of $954.83 and 240 equal payments of $965.24. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

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