Saving the down payment to buy your dream home can be overwhelming. First-time house buyers go through a process of anxiety because they are lost and have no idea of where to start from. Saving for a down payment is straightforward and the amount you pay determines the mortgage type you get, the property you can afford and whether or not you need to buy mortgage default insurance. But how much is the minimum down payment for house? Let’s find out.
What exactly is down payment?
Before we examine the minimum down payment for house, it is worth understanding what down payment is in the first place. In simple terms, the minimum down payment is the amount of cash a house buyer gives to a house seller to lock in the purchase deal. The remaining money owed on a house purchase is usually paid through a mortgage loan that a buyer obtains. The actual amount differs depending on the loan program but as a rule of thumb, the standard minimum down payment expected for a conventional loan is 20% which should be due when signing the closing documents.
Breaking down the minimum down payment
In financial status, a home down payment is expressed as a percentage of the total purchase of your home. Minimum down payment amounts are viewed by lenders as proof that buyers are committed to purchasing a house and that they’ll make all the mortgage payments.
Example
If you wish to buy a house for your family worth $200,000, you will have to first save a total of $40,000 for this purpose. Once you locate your dream house, you will need to pay cash of $40,000 as a minimum down payment, which is typically 20% of the house selling price. Then, you will borrow $160,000 which you can comfortably pay with thirty years mortgage.