The Down Payment

The down payment, a cost that you pay at closing, can affect your mortgage in a number of ways. Below is a summary of the difference between making a higher up-front payment vs. a lower up-front payment.

Should I Pay More or Less "Up-Front"?

Higher up-front payments result in:

• Lower monthly payments
• Lower private mortgage insurance (PMI) costs (if applicable)
• Lower interest payments

In fact, making a down payment of 20% or more can save the homebuyer money by avoiding the monthly mortgage insurance payments.

On the other hand, lower up-front costs mean that your cash requirements at closing are much less, although monthly payments may be somewhat higher.

These lower up-front costs may be a significant benefit for first-time homebuyers and people who simply don't have a lot of cash on hand. The Department of Housing and Urban Development (HUD) has some tips that may be helpful to you as you shop for mortgages.