A good rule of thumb when budgeting for a home is to expect to make a _______ down payment.

• A. 50%
• B. 20%
• C. 2%
• D. 5%

Answer: (B)

Verified step by step guidance

1. Understand the concept of a down payment: A down payment is the initial upfront portion of the total purchase price of a home, paid by the buyer. It is typically expressed as a percentage of the home's price.
2. Review common down payment percentages: In financial accounting and budgeting, typical down payment percentages for homes range from 5% to 20%, depending on factors such as loan type, lender requirements, and buyer's financial situation.
3. Analyze the options provided in the problem: The options given are 50%, 20%, 2%, and 5%. Consider which percentage aligns with common practices in home budgeting.
4. Identify the most realistic and widely accepted percentage: Based on industry standards, a 20% down payment is often considered ideal for avoiding private mortgage insurance (PMI) and securing better loan terms.
5. Conclude that the correct answer is 20%, as it reflects the standard rule of thumb for budgeting a home purchase in financial accounting.