How Much Should You Really Put Down on a Home?

The standard advice is to put down 20 percent. That avoids private mortgage insurance, gives you better loan terms, and signals to sellers that you're financially strong.

But 20 percent isn't always the right answer. Here's how to think about it.

The case for putting down less than 20 percent

If you're paying $3,000 a month in rent and you have $75,000 saved, putting all of it down on a home means you're house-poor the moment you close. You have no emergency fund, no flexibility, and if something breaks in the first month, you're back on a credit card.

Putting down 10 percent instead leaves you with cash reserves for repairs, moving costs, and unexpected expenses. Yes, you'll pay PMI until you reach 20 percent equity. But PMI on a well-qualified borrower is often $150 to $300 a month, and it drops off once you hit 20 percent equity through a combination of appreciation and paying down the loan.

The flexibility and security of having cash reserves often outweighs the cost of PMI, particularly for first-time buyers.

The case for putting down more than 20 percent

If you're in a competitive market and two offers are at the same price, a larger down payment can be a tiebreaker. It signals financial strength and reduces the lender's risk, making your offer feel safer.

If you're buying a property that's difficult to finance, a fixer-upper or something with unusual features, putting down 25 or 30 percent can make lenders more willing to work with you.

And if you're trying to keep your monthly payment as low as possible because you're self-employed or planning a significant life change, putting more down reduces your loan amount and monthly obligation.

What most buyers actually do

In the Valley right now, most buyers are putting down between 10 and 25 percent. The exact number depends on their age, income stability, and how much liquidity they want to maintain.

First-time buyers tend to put down less because they're still building savings. Move-up buyers tend to put down more because they're using equity from their previous home.

How to decide

Ask yourself three questions. After closing costs, moving expenses, and the down payment, do I still have at least six months of expenses saved? Am I comfortable with the monthly payment at this down payment level? Does putting more down meaningfully improve my offer in this competitive situation?

If the answer to the first question is no, you're putting down too much. If the answer to the third is yes and you can afford it, consider increasing your down payment for that specific offer.

PMI isn't the disaster people think it is. It's not permanent and it's not prohibitively expensive for most borrowers. On a $1.2M home with 10 percent down, PMI might be $200 to $250 a month for a well-qualified buyer. That cost disappears once you hit 20 percent equity, which in an appreciating market can happen within a few years.

The worst outcome is stretching to put 20 percent down, closing with almost nothing left in your account, and then having an emergency in month two that forces you into expensive debt. Your home should improve your financial position, not leave you fragile.

If you're trying to figure out the right down payment strategy for your situation, I'm happy to talk through it.

Anj Catalano, The Agency  |  310.404.6955  |  hello@anjinla.com