Buying a house: Can You Afford the Down Payment?
To avoid paying for private mortgage premiums, it’s best to put down 20 percent of your home price (PMI). Usually integrated into your mortgage payments, PMI will add $30 to $70 for every $100,000 lent to your monthly mortgage payment.
Smaller down payment won’t mean it’s difficult to purchase a home. For example, you can buy a home with as little as 3.5 percent down with an FHA loan, but there are more incentives to come up with. In addition to the PMI mentioned above avoidance, a bigger down payment also means:
- Smaller mortgage payments will cost you $955 on a $200,000 mortgage with a 4 percent fixed interest rate for 30 years. You would pay $859 if your mortgage was $180,000 with a 4 percent interest rate for 30 years.
- The options of more lenders-some lenders would not offer a mortgage until you put down at least 5% to 10%.
It’s not just as important as the willingness to afford it over the long run to afford a new house today. It’s a question of whether it is now a good time for you to act on that option is not answered by being able to buy a home and getting a down payment. A good REALTOR® can aid you to make the right offer for the property you’re interested in buying. For a free valuation, contact us at 401-396-2888. We’re always glad to help!