Is 10% Down Your Homebuying Edge?
Heard you need 20% down to buy a home? That old-school rule may cost you more than you think. For high-earners like you, 10% down could be the smarter, faster way to snag your dream home and keep your financial goals on track. Let’s dive in.
Thinking about putting down roots? Maybe things are stable at work or you’re growing a family. Maybe you just want a place of your own. But navigating the world of homeownership as a HENRY [High Earner, Not Rich Yet] comes with unique challenges. That 20% down payment rule can feel like a mountain, especially in a city where even a closet-sized apartment rivals the cost of a private plane. But what if there was a way to unlock your dream home sooner? Is 10% down your secret weapon to conquering the real estate market? Let's find out.
The 20% Myth
We all know the drill. You want to buy a place, the bank wants 20% down. We’ve all heard the 20% down payment gospel, but you know how we feel about old-school financial advice. For high earners who are juggling multiple financial goals, clinging to that outdated rule could mean missing out on other opportunities.
3 Reasons Why 10% Is The Sweet Spot
10% can be a sweet spot because it allows you to keep more cash liquid for other investment opportunities, navigating the unexpected and outsmarting the system so you can get into your home sooner. Here’s why.
1. Opportunity Cost
Every dollar counts when you're building your net worth. That extra 10% you’re not locking into a down payment could go to work for you—whether it’s growing an investment portfolio, funding a business idea, or simply staying flexible for life’s opportunities and surprises.
2. Cash is King
Big city living comes with big city expenses – broker fees, movers who charge by the step, that inevitable "emergency" trip to Bergdorf Goodman. A cash cushion gives you the flexibility to keep up with the rest of your lifestyle.
3. PMI is Temporary
Yes, PMI exists, but it’s a temporary trade-off. Once you’ve built enough equity, it goes away—leaving you with the long-term benefits of homeownership.
The 10% Down Payment Checklist
Sure, 10% is less than 20%. That's basic math. But that doesn’t mean as soon as you save up 10%, you’re ready to pull the trigger. Here are some signs and cash considerations that you’re a good candidate for 10% down.
Credit Score: A stellar credit score is your golden ticket to lower interest rates and better loan terms. So, keep those payments on time and that credit utilization low.
Job Security: While your city is likely a land of opportunity, make sure your income is stable enough to handle a mortgage.
Location, Location, Location: Think long-term. Is this a neighborhood you can see yourself in for at least 5-7 years? Factor in resale value and potential appreciation.
Closing Costs: Don't forget about closing costs, which typically range from 1-3% of your home price, can vary based on location and lender, so be sure to include them in your plan.
Furnishings: That hand-me-down couch might not cut it in your new condo. Account for furniture upgrades in your overall costs.
Cash Reserves: When putting 10% down, banks sometimes want to see 12 months worth of payments on hand. Check in with your preferred mortgage lender ahead of time so you can plan accordingly.
5 Reasons Renting is Not Throwing Money Away
The Bottom Line
Building equity, enjoying potential tax benefits, and escaping the endless cycle of rent payments are compelling reasons to consider homeownership.
For high earners ready to make smart moves, a 10% down payment can help you enter the market sooner while keeping your financial flexibility intact. Ultimately, the decision rests on your individual circumstances and goals.
Key Takeaways
A 10% down payment can be a strategic advantage for high earners, allowing them to enter the housing market sooner.
While a 20% down payment is often considered the standard, it may not be necessary, especially for those with strong financial profiles and competing investment priorities.
Before making a decision, carefully assess your financial situation, including your credit score, job security, and long-term goals.
The F. Word
Ready for some real talk on how to master your money? Pull up a chair and pour yourself a glass.
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