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It’s good advice worth heeding. 

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Coming up with a home down payment is no easy feat these days. That’s because home prices are still elevated across the country. But you’ll need to prepare to put some money down when you close on your mortgage. And if you ask Suze Orman, there’s a minimum down payment you should aim for.

Aim for at least a 10% down payment

The well-known financial guru’s advice for home buyers is to put down a minimum of 10% at closing. Doing so could help minimize the monthly mortgage payments you’re on the hook for (whereas if you put down less money at closing, you’ll owe more money every month).

But Orman would prefer that buyers put down 20% when they close on a mortgage. And the reason boils down to avoiding private mortgage insurance, or PMI.

PMI is a costly premium that generally gets tacked onto your monthly mortgage payments when you don’t make a 20% down payment. And don’t be fooled by the word “insurance.” That insurance is there to protect your lender, not you.

You really don’t get any financial benefit out of PMI. All it does is make you pay more, when you’re already trying to cover the many different costs associated with owning a home. So it’s best to avoid PMI if you can.

But steering clear of PMI isn’t the only reason to try to put down 20% on a home purchase. The other reason, says Orman, is that if you’re not in a position to make that sort of down payment, it could indicate that you’re stretching your finances to make that home purchase. And that’s problematic.

Now, this isn’t to say that you can’t afford homeownership period if you don’t have the funds for a 20% down payment. It may just be that you ought to be looking for a less expensive home, Orman explains.

Waiting to buy if you’re short on down payment funds

If you can’t afford to put down 20% on a home, a mortgage lender might work with you anyway. Many lenders will accept 10% down at closing, and some will take even less.

But doing so could mean taking on larger mortgage payments, facing PMI, and struggling to keep up with your costs. And that’s not a situation you want to land in.

So if your finances are such that you don’t have 20% to put down on a home, waiting to buy could be a better solution for you. That way, you can go in with more confidence and potentially avoid financial stress.

Meanwhile, if you’re eager to boost your down payment funds, try following a strict budget for a number of months and cutting back on any expense that isn’t essential. That could mean canceling cable, avoiding restaurants, and skipping costly social events for a short period of time.

Getting a side hustle is another good way to boost your down payment funds. And you may decide to hang onto that side job after buying a home so you can better cope with the expenses involved.

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