Should I Pay PMI or a Bigger Down Payment?

You've heard lots of people (us included) tell you a 20% down payment is the golden rule. But sometimes rules were made to be broken. 

Here's why paying PMI might be better than putting 20% down. 

It frees up money for other things

Putting 20% down is a good rule. But having an emergency fund is an even better one. If a smaller down payment means you have money saved to cover living expenses if you suddenly find yourself unemployed, or if you're hit with unexpected medical expenses, that's not a bad thing. 

It can protect your investment

During the 2008 housing crisis, homes values plummeted and thousands of people found themselves underwater on their mortgage. If you make a 20% down payment on your house, that money is tied up in the home. So if your home value drops, it's going to be hard to get that money back. But if you keep that money liquid, you're giving yourself a little protection in case your home value does drop because that money isn't already spent on the home.

It can allow you to make upgrades

If you have a big chunk of money saved, putting less of it toward a down payment means you have more available for upgrades. 

If you subscribe to the traditional 20% down rule, that might sound a little irresponsible. But hear us out. If you spend the money on upgrades you can increase the value of your home. If you're able to increase it enough, you can get a new appraisal. If you can show that your loan to value ratio is now at 80%, it will mean that you can get your lender to remove your PMI altogether. So, not only are you getting rid of PMI, but you're also getting the kitchen, bathrooms, etc that you really want. 

If you're set on putting 20% down...

That's fine, too! There are lots of ways to save for it and plenty of first-time buyer programs you can take advantage to help you get to where you want to be. 

You're the only one who can judge what's right for your situation. Take a look at your budget and longterm goals before you decide how much money makes sense for you to use for a down payment. 

Ready to get started? Let us walk you through the buying your first home