The Truth About Down Payments

Purchasing your first home or upgrading to fit the needs of your growing family can be a daunting task. Financial hurdles and time challenges can make the process seem insurmountable. A 20% down payment was once the norm, but today many loan options are available to help you avoid those prohibitive costs up front.

So exactly what is the down payment, and how does it affect your loan? A down payment is the percentage of your home purchase paid in cash. It’s not only a sign of good faith, but it also minimizes the risk for the bank. In return, you are rewarded by having that percentage applied directly to the principal of the loan. Confused over some of the terms? Check out our infographic for definitions of common mortgage lingo.

Less than 20% is now acceptable

The average down payment for homeowners this quarter was 14.8%, but with new government programs, you can pay as little as 5% or even 3% down when you purchase your home. Private mortgage insurance is usually needed for down payments of less than 20%, but if you are credit worthy, this may be the perfect solution for you.

Still, a higher down payment has its benefits

It’s not uncommon for potential homeowners to want to put any available funds into house repairs, furniture, moving expenses, etc. But remember that your down payment directly impacts your loan principal. In other words, the more you pay up front, the less your monthly payment will be and the less interest you pay in the long run.

Additionally, a higher down payment up front can remove the need for the additional expense of private mortgage insurance, and will also help you build the equity in your home at a faster rate. If you are capable of putting up at least 20%, you can experience these benefits when purchasing a home. Capital City Home Loans has tools available for you to calculate not only your down payment, but your monthly payment as well.

Financial assistance is available

The majority of people do not realize there are down payment assistance programs available for middle-income homebuyers. There are a growing number of options available for people who want to buy a home but are struggling with the down payment, and Capital City Home Loans can help you navigate these programs. Check out our down payment assistance page to get more information or to see if you qualify. On average, buyers receive about $5,000 to $20,000 in assistance, depending on the program and the state where they live. Capital City Home Loans has paired many clients with assistance programs over the years, and you could be next!

The American Dream of home ownership is within your reach. Capital City Home Loans helps both firsttime buyers and growing families find their dream homes, and can help you jump over the down payment hurdle with ease.  For questions regarding down payments, and to see if you qualify to receive down payment assistance, call your closest Capital City Home Loans branch or visit