If you haven’t saved up a 20% down payment, you’re not ready to buy a house.
Why? Not just because of PMI, which is the extra money you’ll usually pay when you get a loan without 20% down.
The real reason for saving 20 percent before buying is controversial: building a habit of saving is important before you buy and have unexpected housing expenses such as a broken water heater, roof, or unexpected taxes.
I often get frustrated comments about how this law “doesn’t work”. “How should I save 20%? That will take years!”
Yes, it will—that’s why you should save now. Saving is a habit best done before the loan is compromised. Additionally, consulting with different mortgage lenders to find the best mortgage terms and rates can have a big impact on your financial planning. The Federal Reserve plays an important role in influencing interest rates, which can affect how much you need to save for a down payment, highlighting the importance of understanding the broader economic factors at play.