‘re looking to buy a $400,000 house. While a 20% down payment is often recommended to avoid paying private mortgage insurance (PMI), it’s not always necessary. In the examples above, we discussed scenarios with both a 7% and a 20% down payment on a $400,000 home.
If you can afford a 20% down payment on a $400,000 house, that would be $80,000. This would leave you with a $320,000 mortgage. However, if a 20% down payment is not feasible for you, a smaller down payment is also an option. In the example with a 7% down payment, you would need to come up with $28,000. This would leave you with a $372,000 mortgage, but you would likely need to pay PMI as well.
Ultimately, the down payment you choose will depend on your financial situation and goals. It’s important to consider how much you can comfortably afford to put down without draining your savings completely. Additionally, speaking with a lender can help you understand the best down payment options for your specific circumstances.
In conclusion, affording a $400,000 house requires careful consideration of your income, debts, down payment, and other financial obligations. The 28/36 rule is a helpful guideline to determine how much you can comfortably afford to spend on housing costs. By understanding these factors and working with a lender, you can determine the best path to homeownership that fits your financial situation.