Fournier Law Blog

Intelligent legal insight from our team of experienced attorneys.


Do Buyers Really Need a 20% Down Payment To Buy a House?


Many homeowners may remember setting aside money each month in order to save the 20% down payment necessary to purchase a home, especially to avoid having to pay PMI (Private Mortgage Insurance.)  However, more and more first time home buyers are deciding to purchase a home before they have saved the 20% down payment.

According to an article published by Business Insider, reporter Liz Knueven states, “For many young Americans struggling with student-loan payments, higher rent costs, and relatively stagnant salaries, saving a fifth of a home’s value to get a mortgage simply isn’t on the radar.” 

Real estate professionals aren’t against the idea either.  For first time home buyers, especially near large cities where home values are steep, saving the 20% down payment can take many years.  Instead of saving the cash, buyers can purchase a home and begin building equity, even while paying the PMI of .3%-1.2%.  As the home builds in value, homeowners may be able to drop the PMI, once the mortgage value reaches 78%-80%.

Despite the decrease in home buyers waiting to have the 20% down payment, there are still advantages to a larger down payment if its possible.  It can help edge out competition in a multiple offer situation on a home, can help secure a lower interest rate and save the cost of the PMI each month. 

Read the entire article.