What is typically the maximum percentage of the purchase price for a down payment when buying a home?

When purchasing a home, the traditional maximum percentage for a down payment is often considered to be 20% of the purchase price. This figure is significant for a few reasons. Homebuyers who provide a 20% down payment typically avoid private mortgage insurance (PMI), which is an additional cost that protects lenders if the borrower defaults on the loan. By making a larger initial investment, buyers can demonstrate financial stability and lower their overall borrowing costs, as having a larger equity stake in the property poses less risk to lenders.

Moreover, putting 20% down can lead to more favorable loan terms, such as lower interest rates, as lenders may view these borrowers as lower-risk. While there are programs available that allow for lower down payment options, such as 3% or 5% for first-time buyers, the 20% down payment remains a common benchmark in traditional home purchases. This standard can also influence the overall affordability and long-term financial strategy of the purchase.