|There’s a fairly common misconception that you’ll need a 20 percent down payment before you can buy a house. It’s recommended since it’ll help you avoid paying mortgage insurance, reduce your monthly payment, and get you a lower mortgage rate.
But, depending on the terms of your loan, the amount of money you need to put down is flexible. So, what do most home buyers put down and how do they get it?
According to a recent report by Zillow, just 43 percent of home buyers nationally put down 20 percent or more, which means many homebuyers opt for a smaller down payment. Seventy percent of buyers said they used savings as part of their down payment. Proceeds from a home sale and gifts from family or friends were also popular sources for down payment funds. Other sources included investments and retirement accounts.
In short, the amount and source of your down payment will be unique to your financial situation and the home you’re hoping to buy. It’s important to go over how much you can afford to put down and what costs will be associated with a smaller investment. Your down payment will have a long-term effect on your financial future.