Should You Put Less than 20% Down on a Home?

Buying a home doesn’t have to mean sacrificing your retirement goals! With PMI becoming more affordable and various loan options available, you might not need to put 20% down. Talk to a financial advisor to find the best balance for your savings goals.

“When it comes to saving for a home, it can be a very overwhelming and daunting conversation to have and a lot of times you’re thinking, ‘How much do I really need to save for my down payment for a home?’ Typically, you’ve heard save 20% for a down payment on a home. A lot of times, this is directly related to avoiding PMI insurance, which is an additional insurance that banks want to charge you when you don’t have 20% of equity in your home. But, what this can do is actually lead you to maybe giving up some of the retirement goals that you could be saving for as well as your home down payment goals.

Nowadays lenders are now really making sure that borrowers are vetted with making sure that you’ve had two years of consistent income, that you have a good debt to income ratio. Because of this, the PMI insurance has actually really come down and become more affordable than it used to be. So it could be that saving 20% doesn’t necessarily make sense for you and that you could get into a home with maybe 15%, 10%, 5%. There’s actually conventional loans that you only need 3% down. There’s a lot of government loans and programs where you don’t have to have the traditional 20% down payment so it’s really important to have a plan to be talking to a financial advisor in order to see what is the best down payment for you it can really depend on cash flow, long-term savings goals, all these different things.

You don’t have to put retirement on the side or the back burner in order to get into your dream home. Having these conversations with a financial advisor could really help you determine the best balance between coming up with a home down payment and saving for your short-term and long-term goals.”