The math is simple:
$400,000 home = $20,000 down
$500,000 home = $25,000 down
$600,000 home = $30,000 down
$750,000 home = $37,500 down
$1,000,000 home = $50,000 down
Keep in mind that your down payment is not the same thing as the total amount of cash you'll need to buy a home.
You'll also need to account for closing costs, prepaid taxes and insurance, lender fees, inspections, appraisal, and other expenses.
A number of conventional mortgage options allow qualified borrowers to purchase a home with 5% down.
Conventional financing is often attractive for borrowers with good credit and stable income, but it's not the only option.
Depending on your circumstances, you may also qualify for programs with a lower down payment requirement.
A conventional mortgage can be a great option for buyers who have strong credit and income.
With 5% down, you would finance the remaining 95% of the purchase price. Depending on the loan and your circumstances, private mortgage insurance (PMI) may apply.
The good news is that PMI isn't necessarily permanent. Under certain circumstances, it can eventually be removed as you build equity in the property.
FHA financing can allow qualified buyers to purchase with as little as 3.5% down.
That means a buyer who has the funds for 5% down may have multiple financing options to compare.
FHA loans can be particularly useful for buyers who may not qualify for the best conventional financing terms.
There are also other mortgage programs that may offer lower down payment requirements for eligible borrowers, including certain VA and USDA programs.
Eligibility depends on the borrower's circumstances and the property.
That's why it's important to look at the entire loan scenario rather than simply asking, "What's the lowest down payment I can get?"
Not necessarily.
It depends on your financial goals.
Putting 20% down can reduce your loan amount and may allow you to avoid PMI on many conventional loans.
But putting 5% down allows you to keep significantly more money available after closing.
For example, on a $600,000 home:
5% down: $30,000
20% down: $120,000
That's a $90,000 difference.
For some buyers, tying up that additional $90,000 in home equity doesn't make sense.
That money could instead remain available for emergency savings, investments, home improvements, business needs, or other financial goals.
One of the biggest mistakes buyers make is focusing only on the down payment.
Your monthly payment is also important.
A mortgage payment can include:
Principal
Interest
Property taxes
Homeowners insurance
PMI, if applicable
HOA fees, if applicable
This is particularly important in New Jersey, where property taxes can have a significant impact on the overall monthly payment.
A home with a lower purchase price but higher property taxes may have a surprisingly similar monthly payment to a more expensive home with lower taxes.
If you're putting less than 20% down on a conventional mortgage, you may have private mortgage insurance.
PMI is designed to protect the lender when the borrower has less equity in the property.
While PMI adds to the monthly payment, it can also allow you to purchase the home without waiting until you have accumulated
