Reasons to Love a 20% Down Payment

Reasons to Love a 20% Down Payment

Owning a home counts as one of the cornerstones of the American Dream. In recent years, this lofty goal could be had by putting down a small down payment, (sometimes as little as five percent.) However, putting just the bare minimum down isn’t always wise. Reasons actually exist for you to not only put down but to love that twenty percent down payment. Here are a few.

You Could Actually Get a Mortgage

According to, one of the best reasons to put 20% down on a home is that you increase your chances of qualifying for a mortgage. Most people can’t buy a home without one and many of the programs that did allow for a smaller down payment don’t exist anymore. It pays to save up just a bit longer to make that 20% down payment.

You Lessen Your Debt-to-Income Ratio

A higher principal means a higher monthly payment. To avoid that, suggests that potential homeowners plan on putting down that twenty percent. You don’t want your mortgage payment to go over 28% of your monthly payment ratio. (You get better mortgage terms if it doesn’t.)

Smaller Monthly Payments and More

There is a corollary to the post above. That is that if you put more down on your house up front, you have smaller monthly payments in the end. The Consumer Financial Protection Bureau recently updated its terms for a “qualified mortgage.” Buyers whose debt ratio is higher than 43% – that is to say, that homebuyers who have $43 going out for debt for every $100 earned – won’t qualify for this. (That 43% includes the 28% you pay out for your monthly mortgage bill.) Having a lower mortgage means you might.

You’ll Have to Pay Mortgage Insurance

A less than 20% down payment means you’ll have to get mortgage insurance. That can add between $50 and $80 more that you’ll have to pay out each month.

Final Thoughts

It’s a nice thought to get a house for practically nothing down, but it may not be in your best interest in the long run. Buying a home comes with its own set of challenges. However, some of those financial challenges can be alleviated or eliminated altogether by putting down a larger down payment.

If you’re looking for a custom home builder in Georgia contact Trinity Custom Homes today! We can visit with you about building and financing a home.