Guam Real Estate Practice Exam

A down payment of 20% is often considered an acceptable and traditional benchmark in real estate transactions. This percentage is significant because it usually allows buyers to avoid private mortgage insurance (PMI), which is an additional cost that lenders require to protect themselves in case the borrower defaults on the loan. By putting down 20%, buyers demonstrate a strong commitment and financial stability, which can also lead to more favorable loan terms and interest rates.

Additionally, a 20% down payment tends to provide a buffer against market fluctuations, giving buyers more equity in their homes right from the start. This level of equity can protect homeowners if property values decline, as they are less likely to owe more on their mortgage than the property is worth. While lower down payments are certainly possible and commonly accepted, the 20% mark is viewed as a standard that signifies serious investment and enhances financial security for the homeowner and lender alike.