5 myths about down payments

If you’re getting ready to buy a home, you’ll need to think about making a down payment. Here’s a look at some common misconceptions to help you better navigate the process.

1. You must make a down payment of 20 percent
Although this amount is the norm, it’s possible to pay as little as three percent of the purchase price upfront. However, if you put down anything less than 20 percent, you’ll need private mortgage insurance.

2. You’re better off paying for insurance than a large down payment
It might seem convenient to buy a home with a small down payment, but there are several good reasons you should avoid getting private mortgage insurance. Among other things, consider the cost of premiums.

3. You should offer to pay for a home in cash if you can
Sellers might be tempted by a cash offer if they want to close the deal quickly. However, they’ll likely be able to get more for the property if they go with a buyer who’s backed by a mortgage. Unless you can afford to outbid in cash, opt for getting a mortgage.

4. You automatically qualify for homeownership assistance
There are a variety of public and private entities that offer programs and grants to help low-income and first-time homebuyers afford a property. However, each has its own specific eligibility criteria that need to be met.

5. You shouldn’t put down more than 20 percent
A larger down payment can help you obtain a lower interest rate on your mortgage and reduce the amount and duration of your monthly payments. To enjoy these and other benefits, however, you’ll need to put down at least 25 percent.

To help you find a property that suits your budget and preferences, team up with an experienced real estate agent.