Aerial Development Group Blog | Adulting in the Form of Down Payments
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Adulting in the Form of Down Payments

Adulting in the Form of Down Payments

When it’s time to buy a house, you have a down payment. It’s like back in the days of a security deposit but a lot more money and you don’t get it back! Sad, I know. Down payments are important, and I’m going to give you a few reasons why a down payment, specifically, 20% or more is key:

-You’ll have a higher chance of receiving the loan (mortgage) for the house.

-You have to meet the 43 percent debt-to-income ratio. Meaning, things like credit card debt, student loans, property taxes, etc. have to be less than $43 to every $100 of your monthly income.

-If you save and can put more money down, that means a smaller, more affordable monthly payment.

-A lower interest rate will save you money over the lifetime of the loan. 20% down is important in regards to interest rates because the interest rate charged on a loan with 20% down is typically lower than on a loan with less than 20% down.

-Putting 20% down allows you to dodge the private mortgage insurance (PMI). PMI is extra insurance lenders require on down payments that are less than 20%. They often include an extra percentage on the mortgage interest rate, too.

-20% down instantly builds equity in your home which is helpful if the market crashes temporarily.

Now, 20% down is not required. It’s a lot harder to save 20% these days due to the increase in home values. The minimum that can be put down is 5% and that’s how much a lot of first time homebuyers put down. 20% is just ideal but a low down payment is an option. After building equity in the house and a few years have passed, you may be in a position to refinance the loan!

I hope you found these helpful! Now go buy your dream house with confidence and a solid down payment!


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