A smart rule is to try and put 20 percent down on a mortgage. There are mortgages such as VA or FHA mortgage loans that require a smaller down payment. However, having 20% down is a good idea that has benefits.
- Improve chance of an approved mortgage application. A higher down payment the better likelihood a mortgage lender will approve a loan because ti will lower your debt-to-income ratio by reducing your monthly mortgage payment.
- No private mortgage insurance known as PMI. Putting 20 percent down avoids the need for you to obtain a lender’s mortgage insurance. Private Mortgage Insurance (PMI) is extra insurance required by lenders with borrowers who have less than 20% down of the sales price.
- Have equity. By putting 20 percent down, you already are putting equity into your property.