Down payments are important since the size of a buyer’s down payment can affect their home buying budget, mortgage, financial risk level, and ongoing monthly costs. When a buyer has a higher down payment, their overall mortgage, and monthly payments, will be lower as a result.
Reaching a 20% down payment is ideal for most homebuyers as it removes the barrier stopping them from buying a home for $1,000,000 or above. A 20% down payment also removes the need for mortgage insurance.
If a buyer puts down less than 20%, they are required to purchase mortgage loan insurance. This cost is typically rolled into their mortgage, accruing interest and increasing their monthly carrying costs over the lifetime of their mortgage.