Do I still need a 20% down payment?
The “20% rule” is no longer required. In fact, today you can get a mortgage for as little as 3.5% down. But is it beneficial to save up for a larger down payment?
If you don’t have at least 20%, you will pay an additional mortgage cost called “private mortgage insurance” (PMI). This is because your loan is seen as riskier for the lender, in the event you default on your loan. However, it’s not as important to have 20% down as it used to be!
PMI was much more expensive than it is today. In addition, not putting 20% down meant your interest rate was significantly higher. While there is still great benefit to having no PMI, the advantages of a 20% down payment aren’t what they used to be.
Be wise with your assets.
This means doing what’s best for your financial goals. The decision of what to put down on a new house is personal to your financial situation. Even Dave Ramsey recommends a 10% down payment if you haven’t reached the 20% goal after several years of saving.
At Stewardship, we have wise advisors that are here to help you make sense of different options. If you’re looking to buy a new home, schedule a time to meet with one of our Stewardship Mortgage advisors.