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For many people, raising enough money to be able to pay off the usual 20% down payment for the purchase of a house can be quite a difficult task. The good news is that there are several lending institutions nowadays that provide mortgage packages that have low down payment rates. In making your decision on how much money to put towards your down payment however, you will have to consider what the actual going rate is.

In most cases, you will be required to make a down payment of 20% in order to be approved for a home mortgage. If you are not able to make the 20% required by most mortgage lenders, you may be allowed to apply for a mortgage provided you purchase Private Mortgage Insurance or PMI. The cost of this insurance package is usually half of 1% of the sale price of the property that you intend to buy and serves to protect the mortgage lender from buyers that do not pay off the loan. If you do end up having to purchase PMI, you will incur substantially higher total mortgage payments overall than if you had simply raised the 20% down payment that is typically required.

If you just cannot raise the 20% down payment required, purchasing PMI may be your next best alternative. The good news is that in most cases, you will be able to cancel the PMI insurance once you have managed to earn 22% equity on the property. If you have a good record of making payments, you may even be allowed to cancel PMI once you have managed to earn 20% equity on the home.

Another option is available to you if you do not want to purchase PMI and that is to get a loan that will allow you to pay 80% of the selling price of the property with one mortgage, and half of the 20% required down payment with a second mortgage. Keep in mind though that you will still have to raise the remaining 10% of the down payment. Yet another alternative to avoiding having to pay PMI costs is to secure an FHA loan from the government. This option will entail having to pay insurance as well, although you will be able to purchase the home with as low as a 3% down payment.

If you are looking to purchase your home without having to pay any down payment at all, you may be able to find mortgage arrangements that will allow you to do just that, with packages that let you finance the entire selling price of the property. The downside of these types of arrangements however is that the interest rates are generally much higher than those of typical mortgage plans. This will result in substantially higher monthly payments and you will still have to purchase PMI, since you were not able to raise the expected 20% down payment.

In review, there are many options available to you when making the decision on how much down payment you should pay towards the purchase of a home. The decision to go with a particular plan would depend on what best fits your needs and circumstances.

If you want to earn equity on the property as quickly as possible and wish to pay less in mortgage payments every month, paying the standard 20% down payment is your best option.

If you wish to avoid paying the cost of PMI but are unable to raise enough money for the 20% down payment, you may want to apply for a loan that will allow you to pay 80% of the purchase price with a first mortgage and half of the 20% down payment with a second mortgage.

If you can only raise enough money for 3% or 5% of the down payment yet still want o purchase your home immediately in order to avoid the increase in prices, you may have to apply for an FHA loan.

If worst comes to worst and you do not have enough money to pay off any portion of the down payment, you will probably have to pay higher monthly mortgage rates for a plan that will allow you to purchase your home with no down payment. Keep in mind that with this option, you will have to make sure that you are able to make the monthly payments and look for a mortgage plan that will offer better terms in the future.

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