How Much Down Payment Should You Pay When Buying a New Home?

How Much Down Payment Should You Pay When Buying a New Home?

Most lenders require you to make a home down payment of between 3% to 20% of the purchase price as a prerequisite of securing a mortgage. Note that while each type of mortgage has its own set of rules, the specifics of a down payment depend on factors such as:

The bottom line is, you can snag a lower interest rate and reduce the total cost of your loan the more you put down. Deciding what is a reasonable down payment on a house can feel overwhelming, which is why knowing more about the process can help you make sense of it all and be prepared when the time comes to look into getting a mortgage for your next home.

How Do Lenders Calculate Mortgage Down Payments?

Before deciding on a home mortgage down payment, you need to have your finances in order and carefully consider which loan types are most likely to help you achieve your goals. Set yourself up as best as you can to score the loan application and the lowest rate. 

So, how do you get the best rates? No home is ever 100% financed, along with other up-front costs; a lender will check if you will afford your monthly down payment mortgage percentage without exceeding 28% of your gross income.

Lenders use a standard mathematical formula to calculate your principal and interest payment. Your monthly payment or EMI payments toward your principal and interest payment depends on three factors:

  1.   Total Loan Amount borrowed
  2.   Interest Rate on the amount borrowed and
  3.   Loan repayment time frame agreed upon between lender and borrower

It's important to recognize that there are many factors that you may forget to put into account when calculating your home mortgage down payment, such as taxes, HOA fees, monthly utility bills, unexpected repairs, market value movements, and insurance costs, maintenance costs, etc.



These calculations can prove more complicated if you don't understand how loan structures work; therefore, contact us today for professional guidance on how much your down payment percentage should be when buying a new home.

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