Down Payment Comparison
It’s a fact that the more you put down, the lower your monthly mortgage payment and the less you will owe the bank. It's also a fact that homebuyers who put at least 20% down don't have to pay PMI, an added insurance policy that protects the lender if you are unable to pay your mortgage. However, if putting 20% down will deplete all of your savings and leave you with no financial reserves, it's probably not in your best interest.
A growing number of today’s borrowers are making down payments that range from 5 to 10%.
You will have to pay Private Mortgage Insurance (PMI) with down payments of less than 20%.
With either “Freddie Mac’s Home Possible Advantage” program or "Fannie Mae’s HomeReady Mortgage", qualified borrowers can put as little as 3% down.
Each program has its own guidelines.
Carefully evaluate your finances to determine how much you can afford and talk with your lender or housing professional about the down payment option that makes best sense for you. The chart below will show the monthly mortgage payments based on various down payment options and the following criteria. This is for illustration purposes only and rates and terms are subject to change.
Chart is based on following example:
Financing type: Conventional
Mortgage type: 30 Year Fixed
Minimum Credit FICO score: 680
Home purchase price: $400,000
Down payment comparison:
| Down payment %: | 3.5% | 5% | 10% | 15% | 20% |
|---|---|---|---|---|---|
| Down payment: | $12,000 | $20,000 | $40,000 | $60,000 | $80,000 |
| Loan amount: | $388,000 | $380,000 | $360,000 | $340,000 | $320,000 |
| Interest rate: | 4.5% | 4.5% | 4.5% | 4.5% | 4.5% |
| Mortgage payment (1): | $1,965.94 | $1,925.40 | $1,824.07 | $1,722.73 | $1,621.39 |
| PMI rate (2): | 1.54% | 1.28% | 0.90% | 0.38% | 0.00% |
| PMI amount: | $497.93 | $405.33 | $270.00 | $107.67 | $0.00 |
| Total payment (3): | $2,463.87 | $2,330.74 | $2,094.07 | $1,830.40 | $1,621.39 |
Tip: On Conventional loans, the mortgage insurance payment can be canceled from your total monthly payment once you reach 20% equity in your home. For FHA loans, it can be canceled if you made a 10% or larger down payment when you purchased the home. AND, You have made on-time mortgage payments for the last 11 years.
Notes:
1) Monthly mortgage payment includes Principal & Interest
2) PMI (Private Mortgage Insurance).
3) Total Payment calculation does Not include property taxes, insurance, or HOA fees.
