Many first-timers don't have the cash to put up 20% of a home's value. No need to worry, says Robert Walters, chief economist and vice president of the Capital Markets Group for Quicken Loans. Your mortgage officer should be able to find alternatives that work for you.
When you can however, put at least 20% down you can avoid paying PMI (mortgage insurance) and you can also pay your own taxes (at the end of the year) versus, having them included in your monthly mortgage. So there are definite advantages to putting down at least 20%!
Skirting the traditional 20% down payment means a mandatory additional expense: private mortgage insurance. PMI might not seem like a big deal, but it comes with a few hitches. This insurance typically costs between 0.5% to 1% of the entire loan amount on an annual basis. In other words, a $150,000 loan at a 1% insurance rate adds an extra $125 per month to your bills. The insurance protects your lender against the possibility of you defaulting on the property and can be charged until as much as 50% of the loan is paid off. The good news is PMI is tax deductible for married couples jointly making up to $110,000.