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Question:


My husband and I are planning to buy our first home in the next two to five years. What is the recommended down payment? It seems like I’ve heard something about a minimum of 5 percent of the home’s total cost. Is this correct?
-LSHall


Answer:


Five percent is very low, especially with the housing market so shaky and banks still recovering from the decline in home prices and high foreclosure rates of the last few years. If you are offered a mortgage with so little down, chances are the interest rate will be somewhat higher than you would have to pay with a bigger down payment.
 
If you’ve got two to five years to set aside money for the down payment and all you expect to come up with is 5 percent, you may be planning to buy too much house in relation to your income and other expenses. If you can save a bigger percentage, say 10 or 15, then you’ll owe less on the mortgage, probably get a lower interest rate and be able to sleep more easily.
-Conrad de Aenlle



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