Sell & Buy

Your home down payment

The down payment for your home is the portion of its purchase price you pay up front. Then you’ll pay the rest—plus interest—in monthly installments.

Getting together enough to put down may seem tough. But there are ways to get it done. And with some homebuying programs and different loan types, it might be easier than you think.

How much is a home down payment?

Many down payments are between 5% and 20% of the total purchase price. There are "exceptions": FHA Loans require lower down payments. Military veterans, active service members, and their families may qualify for a zero-down VA Loan.

Here’s an example. Let’s say you buy a $200,000 house. At 20%, your home down payment would be $40000 with a $160,000 loan. At 3.5%, your down payment would be $7,000 and your loan would be $193,000.


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Private mortgage insurance

If you put down less than 20% on a conventional loan, you may need to carry private mortgage insurance, also known as PMI. Lenders require PMI as protection against default. Homeowners with PMI often have a variety of options for paying the premiums.

If you can’t afford 20% down, that doesn’t necessarily mean you have to carry PMI for the length of your loan term. This is something that a Mr. Cooper Mortgage Professional will be glad to discuss with you.

Getting to your magic number

For many first-time homeowners, their home down payment is the biggest amount of money they’ve ever gathered together in one place. (And no matter who you are, it’s not pocket change.) But with a solid plan in place, it’s an achievable goal.

Let’s say you want a house that costs $200,000, and you qualify for a mortgage with 3.5% down. That’s $7,000 down. If you can save $500 a month, you can save $7,000 in a little over a year.


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401K

You might be able to borrow part of your down payment from retirement accounts like a 401K. But we strongly recommend consulting a financial planning expert and tax professional first.

The total amount you can borrow will vary, as will the repayment schedule. Borrowing from a 401k comes with some potential risk, especially if you’re nearing retirement.

IRAs

You might also be able to withdraw from an IRA or Roth IRA to help fund your down payment. Again, it’s very important that you consult a tax professional or financial planner before touching your retirement savings.

A word of "warning": The same risks that apply to borrowing from a 401k apply here. Carefully consider what you’re about to do and crunch all the numbers with a professional helping you. Otherwise, you could turn your nest egg into a burned omelet.

The down payment effect

The size of your down payment has a direct impact on your chances for approval, your monthly payment, and your rate. Generally, the bigger the down payment, the lower the rate. But homes are bought every day with all kinds of down payment amounts.

Your best move is probably to pay the largest home down payment you can manage. A Mr. Cooper mortgage professional can help you plan your optimal strategy. Once you have your plan in place, stick to it and be patient. There’s no hurry. Millions of people have navigated this process, and so can you.

Credit

Keep going to learn more about the home buying process! The next section talks about all things credit related.