Pros and Cons of Having A High Down Payment Versus A Low One

Mortgage and Lending with Horizon Lending Services, LLC NMLS # 942863

Many people today are excited about the chance to purchase their own home. However, putting down 20% can be hard to swallow for many hard-working Americans. So, instead, they are turning to lower down payment options so that they can get into their own home faster.


Programs like the FHA home loan program only require 3.5% down, which makes buying a home much more accessible for people who otherwise couldn't afford it. However, this isn't the whole store.


While it may sound great to save so much money out-of-pocket, if you have the chance to even put just an extra 0.5% down on the purchase of your home, it can end up saving you big bucks in the future. So, what should your choice be?


The Pros of a Low Down Payment

  • First and foremost, a lower down payment means having to save less and spend less up front. This means you can get into a new home faster without spending months or even years stockpiling cash.

  • Secondly, a lower down payment means you’ll have more savings left over to cover things like closing costs and moving expenses.


The Cons of a Low Down Payment

  • The first con to do with a low down payment is that you’ll pay more in interest throughout the life of the loan. Say you’re buying a $200,000 home. If you put just 3.5% down, you’ll have to pay interest on $193,000. On the contrary, if you put 5% down, you’d only have to pay interest on $190,000. That can make a big difference in the long run.

  • The second con also factors into the lifetime cost of your loan. With most programs, if you put down less than 20%, you’ll have to pay for private mortgage insurance, which helps protect the lender from defaulting borrowers. This will be tacked onto your monthly payment.


Determining what’s right for you can be difficult, but if you happen to have a few hundred or even a few thousand extra that you can fork out for the purchase of your home, it can save you a lot of money in the long run. Here’s a blog post on the best budgeting apps to help you save for that down payment!


If you need more financial advice on how to save for a down payment, our team of mortgage experts at Horizon FHA Loans is always here to help.


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Sharon Mistowski

Horizon Lending Services, LLC
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