How much money should you save as a down payment for a home loan?


Quick Answer

While a person can buy a home with just a 5 percent down payment, a down payment of at least 20 percent is ideal, according to Freddie Mac. This means if someone is purchasing a home for $200,000, he should have a minimum of $10,000 as a down payment.

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Full Answer

Homebuyers can purchase a home with as little as a 5 percent down payment, but there are some consequences to doing this. First, they must pay private mortgage insurance, or PMI, which is an insurance policy that protects the lender if the buyer cannot pay his mortgage. A down payment of at least 20 percent is required to avoid paying PMI. Additionally, the more money a buyer puts down on a home, the lower his monthly payments are, explains Forbes. This also means the buyer pays less over the life of the loan. For a buyer who cannot afford the 20 percent down payment, however, a 5 or 10 percent down payment may be a good alternative.

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