Should I Pay More or Less "Up-Front"?
The down payment, a cost that you pay at closing, can affect
your mortgage in a number of ways.
Higher up-front payments result in:
- lower monthly payments
- lower private mortgage insurance (PMI) costs
(if applicable)
- lower interest payments
In
fact, making a down payment of 20% or more can save the homebuyer
money by avoiding the monthly mortgage insurance payments.
On the other hand, lower up-front costs mean that your cash
requirements at closing are much less, although monthly payments
may be somewhat higher.
These lower up-front costs may be a significant
benefit for first-time homebuyers and people who simply don't
have a lot of cash on hand. The Department of Housing and Urban
Development (HUD) has some tips that may be helpful to you as
you shop for mortgages.
