How much of a down payment will I need to buy a home? A down payment of 20 percent has been the benchmark for conventional financing, but today, many options are available, some requiring as little as 5%, 3%, or even 0 down. For buyers who qualify for conventional financing but can't handle the high down payment requirements, lenders offer this financing with PMI, or Private Mortgage Insurance. Designed to protect the lender against default by the borrower, PMI allows you to obtain traditional financing with a down payment significantly lower than the standard 20 percent. By using PMI, you may be able to get a fixed rate or adjustable rate mortgage by putting little or nothing down. There are loans available that have the PMI insurance incorporated into the loan. The benefit of this type of loan is that the PMI becomes tax deductible when it normally is not. As with an FHA-insured loan, you must pay premiums for PMI coverage, which are determined by the lender. Moreover, PMI premiums are often lower than FHA insurance, and may be paid as part of your monthly mortgage payment, in annual installments, or in a lump sum at the time you obtain the loan. Your mortgage expert can help you determine which down payment option is right for you and your budget. |