by Nutan Brown
on Friday, December 3rd, 2021 at 9:38am.
Saving for a down payment often happens way before you decide to buy. The amount you will need depends on your price range, so it’s important to know that ahead of time as well. If you are wondering how the down payment works, and how much money you will need, here is some information to help you get started.
What is a down payment?
A down payment is the amount of money you put towards the purchase of a home. The amount of the down payment is deducted from the overall price of the home, the balance of which is covered by a mortgage loan. The minimum amount you need for your down payment depends on the purchase price of the home.
How is a down payment calculated?
When you’re buying a home, the down payment is calculated as a percentage of the total purchase price. The higher the price, the higher the down payment. To get an idea of home much you will need, you can use an online mortgage calculator to plug in some numbers and see what is required.
What is the minimum down payment?
For homes that cost up to $500,000, the minimum down payment is 5%. For homes that cost more than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance. For homes that cost $1 million or more, the minimum down payment is 20%
While this is the minimum required for a down payment, it is often better to put down more money upfront since it will save you money in the long run. When your down payment is bigger, your mortgage loan will be smaller and in the end, you’ll be paying less in interest.
If you have any questions regarding your down payment, feel free to contact me anytime!