Your family, your friends, and the media may want to tell you otherwise, but: it’s okay if you don’t want to make a large down payment for your house.
How big of a down payment you want to make is your decision, and plenty of people buy homes with small down payments and, sometimes, no down payments at all!
The important thing to know is this: when you make a small down payment, it doesn’t you can’t afford to buy a house. It means you prefer to use your money for things other than a down payment.
There are three times when making a smaller down payment makes good financial sense.
First, when making a large down payment depletes your cash reserves.
Having cash in your life is important because your life does unexpected things. Cash is valuable when you become ill suddenly, or need emergency dental work, or lose a portion of your household income.
Down payments can’t convert back into cash in the event of an emergency. Not without another mortgage transaction, anyway.
The second time to make a small down payment is when you want to buy a house and don’t have much cash saved up.
Remember: the mark of “being able to afford a house” isn’t how much cash you’ve saved up, but whether you can afford to make your monthly payment without feeling stressed about your spending.
And, third: make a small down payment when you feel like it! There’s no requirement that says you have to put a lot of money down on your home, so don’t do what other people tell you to do.
Your down payment is your choice!
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Home buyers snatched up properties for sale in May as housing made its v-shaped recovery.