Which Down Payment Strategy Is Right For You?

You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search and available options.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same.

If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities. It is also worth considering how long you plan on living in the home, or even owning it. Some people purchase a home knowing it will be a lifetime investment. Others do not. 

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options. Financing can be a tricky business and the bottom line is that there is no one strategy that works for all people. 

Andrew Kaiser

My name is Andrew Kaiser, welcome to my site! I have a passion for making images wherever and whenever I can. I seek to capture humanity and the world around me with a focus on the figure. Film, digital, pinhole, and instant photography are all fair game for me.


I grew up in the California Bay Area and started taking photography seriously in High School. I was one of the lucky few who had a chance to go to a high school with a working darkroom and a teacher who understood that making images was an art form – care and patience was a necessity in the image making process from start to finish.


Later in life I attended the University of California in Santa Cruz where I received a Bachelors Degree in the History of Art and Visual Culture. After having my fill of the California sunshine I packed up my life and moved to the Pacific Northwest. I quickly found the overcast skies, lush forests, cooler temperatures, and creative communities to be a perfect match for my work.


Over the years I have exhibited my photographs in several galleries and art shows including the Seattle Erotic Arts Festival and Cascade AIDS Project. I’ve published a few books and taught workshops up and down the west coast of the United States. Through this site I’m hoping to share my work and perhaps inspire others along the way.