by Francis Jock

Created on: September 12, 2007   Last Updated: January 05, 2009

Determining the right amount of money to put down on the home of your dreams should not be complicated. The idea behind the down payment is to demonstrate that you are serious about purchasing the home. However, the amount of cash you pony up may make or break a deal depending upon the seller's feelings about the market and the size of any competing buyer's down payments.

Suppose you have just found that perfect home you've been dreaming of owning for your entire life. Of course you want the biggest home you can afford, so the asking price is just at the limit of your budget. You've talked it over with your significant other, and it's agreed on. You're going to buy this wonderful home and live there happily every after.

Then the financial reality sets in, followed by an unending stream doubt flooding your mind, washing away the thrill a little. Better get your offer in as quick as you can, before anyone else takes a liking to your prize and beats you to the punch. How much money do I need? Do I have enough cash in the bank to cover it? Will I be able to eat and pay the bills for the rest of the month? In this case, you might want to reconsider whether the cost of realizing your dreams outweighs the strength of your income-to-debt ratio.

You could pick up the telephone and place a quick call your real estate agent. He or she will be happy to provide you with the average down payment for a similar home in your area. It could be that no down payment is required at all, depending upon how you intend to finance your mortgage. It could also be ten to twenty percent of the selling price. There aren't any hard and fast rules to follow, as every home purchase is unique. But one factor you should consider is the volatility of the housing market in your area.

In other words, if housing sales are slow or declining as reflected by the average length of time a home has been on the market, there's probably little competition. The market is relatively stagnant because people aren't buying at the present time. Keep in mind that sellers and agents, and even lenders will always hype the market to try to make you believe that the market is hot, when the statistical data show that it's actually cooling down.

Home sellers come in many different shapes and sizes. They may be anxious to sell, especially if the market has slowed down and they are facing relocation pressures from their employer. Or, they may be willing to wait out the slump and try to get the highest price possible from

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