How Much Down Payment Should I Make?

There are advantages to both large and small down payments, and which you choose depends on both personal choice and your financial circumstances.

Advantages of a large down payment: Less mortgage to pay off, smaller monthly mortgage payments and greater opportunity to find lower interest rates.

Advantages of a small down payment: Less cash out of hand, therefore more money for other costs; a larger monthly mortgage payment means a larger tax deduction for mortgage interest, maintain current cash for investing elsewhere.

With an FHA loan you will be required to pay a Mortgage Insurance Premium (MIP) at closing. In some cases, with a conventional loan, you will be required to pay monthly Private Mortgage Insurance (PMI). MIP and PMI are insurance premiums which protect the lender against a loan default in higher loan-to-value situations.


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