The Traditional 20 Percent

• The traditional amount of a mortgage down payment is 20 percent of the cost of the home. This means that when you move in, you'll already own one-fifth of the home, which represents a substantial amount of equity. A 20 percent down payment is also above the cutoff for buying private mortgage insurance, which lenders require borrowers to pay for when they make smaller down payments. With a 20 percent down payment you'll avoid this additional cost and be well on your way to owning your home outright.
  
  

Low Down Payments

• Many interested home buyers simply can't afford a 20 percent down payment on a mortgage. A $100,000 home would require the buyer to make a $20,000 down payment, which is more cash than many people have or are willing to spend. Lenders do allow lower down payments in some cases, though they generally require private mortgage insurance to guard against default. The Federal Housing Administration backs mortgage loans with down payments as low as 3.5 percent as a means of encouraging more people to buy homes, but only certain buyers with steady incomes will qualify for their programs.
  
  

As Little as Possible

• One way to approach a mortgage is with the strategy to put down the smallest possible down payment. This is risky because it means that if your home loses value because of a dip in the real estate market, you are more likely to end up owing more on your mortgage than the home is worth (known as negative equity). However, if you're a savvy investor, you can invest the money you keep and use it to make larger mortgage payments in the future, allowing you to pay off your loan early and save on interest in the long run.
  
  

As Much as You Can Afford

• Another approach to a mortgage is to make the largest down payment you can afford, even if it exceeds 20 percent. The more you pay up front, the lower your principal balance will be. This means you'll pay interest on less money, and therefore less total interest by the end of the loan. A large down payment also means more equity, which you can borrow against in the form of a second mortgage to finance major expenses such as home improvements.