This Is the Bare Minimum Suze Orman Thinks You Should Put Down on a Home

The minimum she suggests may be below the amount you'd think it is.

Almost every mortgage lender requires you to make some type of down payment when you purchase a home. However, down payment requirements can vary from as little as 3% down to as much as 20% down.

In an ideal world, home buyers would put down 20% because doing so would provide the broadest choice of lenders, open the door to a lower rate, and help them avoid private mortgage insurance. PMI is an added cost buyers with down payments below 20% typically must incur, and it protects the lender against losses while providing no protection for buyers who are paying for it.

But, most home buyers don't put that much down since saving a 20% down payment can be difficult -- especially in expensive housing markets. The big question, though, is just how low should you go with a down payment. Personal finance guru Suze Orman has some important advice on this issue.

Here's what Suze Orman thinks your minimum down payment should be

On her blog, Orman indicated that while a 20% down payment is the "gold standard," it's "not realistic" for many people. She points out that the average down payment was around 7% at the time the blog was written in April 2019.

While Orman explains she doesn't believe a 20% down payment is a necessity despite it being preferred by lenders, she's also "not a fan of low down payments." In fact, she says that "at a bare minimum," buyers should be putting down at least 10% of their home's value when they make a purchase.

Orman believes making a down payment of at least 10% is important enough that borrowers who would struggle to do so should opt for a less expensive home in a cheaper neighborhood if that's the only way they are able to put down at least that percentage of the home's value.

Why does Orman believe a 10% down payment should be the minimum amount for home buyers?

Orman explained that a minimum 10% down payment serves several important purposes.

First, she says that it proves a potential borrower is "serious" about the purchase they are making. Second, putting so much money on the line also encourages borrowers to be motivated enough to make absolutely certain they won't miss mortgage payments.

In other words, Orman wants to make sure borrowers are putting some of their own money on the line and making some sacrifices to buy their properties, so they take the responsibility of homeownership seriously.

And while these are good reasons to make a minimum 10% down payment, there's also another important factor as well. A down payment below this amount puts you at serious risk of not being able to sell your home and pay off both the mortgage and closing costs if you need to -- especially since you'd be looking at a real estate agent commission of around 6% if you had to sell.

You don't want to end up owing so much money on your home loan that you become trapped in the house, so it's a good idea to follow Suze Orman's suggestion and make sure that if you're buying a home, you're doing so with a down payment of at least 10%. If you can't, waiting to buy or opting for a cheaper property could be your best move.