I received a question recently from a great friend who is starting to plan his first home purchase. He lives in the Silicon Valley, where a starter home costs more than luxury homes in most markets, and so it was clear to me that the consideration of his first purchase is extremely intimidating for him.

He asked a great question – what is a normal down payment for your first home? While my knee jerk reaction was a bit too simplistic “what do you feel comfortable putting down?” my next thought was that the question could be much more complex. It means more than “what percentage should I put down?” To some it could mean “what percentage of my total cash on hand should I dedicate to a down payment, and what percentage should I invest into stocks and set aside for cash reserves?” Or maybe it means, “can I put down less than 20%? What should my mortgage payment be based on my income?” For some it could mean “how much should I have saved before I buy a house, and should I risk investing my money into a home during a particular market cycle?” If I buy a fixer upper, will I have enough cash to remodel it? When will I find out what the costs are to remodel and will I have a chance to review those costs before committing to the purchase?” A “normal” down payment can be different for everyone, and is certainly market-dependent, but it’s an interesting starting point that can open a dialogue toward making a decision that feels comfortable. How that comfort is achieved is another related topic. We are not financial advisors or accountants, but we do work in tandem to help guide those decisions and can introduce our clients to professionals and fiduciaries who work together toward educating and guiding buyers in their decision-making process.

Online mortgage calculators are good tools, but are not always accurate by default. There are many variable inputs you need in order to make the calculator do its job correctly, so if you really want to know what the numbers look like for buying a home, and how the numbers fluctuate as you put more or less money down, connect with us and we can give some insights on what those general calculations might look like.