Benefits of a Higher Down Payment

Since 1999, loan underwriting and granting firm Service 1st Mortgage has served homebuyers across the country. Service 1st Mortgage’s team of experienced mortgage brokers handles all major home loan transactions, including calculating mortgage loans based on the homebuyer’s downpayment.

Some mortgage programs allow buyers to purchase a home with as little as 3 percent down. While this can enable people to move into a home who otherwise wouldn't be able to do so, there are some benefits to saving up the once standard 20 percent down payment.

Homebuyers who put down 20 percent or more of the asking price are exempt from the private mortgage insurance (PMI) requirement. This is a monthly insurance premium that lenders require homeowners with little equity in their homes to pay. PMI can add hundreds of dollars to housing costs.

Similarly, mortgage payments for homeowners who make a small down payment are higher. This is due to both a higher interest rate on their loan and a larger loan balance to pay off. Additionally, closing costs like origination fees are based on the loan balance subtracted by the down payment. In this way, a higher down payment can reduce the cost of transaction fees.