How much down payment should I make?

There are advantages to both large and small down payments, and which you choose depends on both personal choice and your financial circumstances.

Advantages of a large down payment: Less mortgage to pay off, smaller monthly mortgage payments and greater opportunity to find lower interest rates.

Advantages of a small down payment: Less cash out of hand, therefore more money for other costs; a larger monthly mortgage payment means a larger tax deduction for mortgage interest.

With an FHA loan or less than a 20% down payment on a conventional loan, you will be required by the lender to take out mortgage insurance. The FHA (Federal Housing Administration) calls it MIP (Mortgage Insurance Premium), while private companies call it PMI (Private Mortgage Insurance)

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