The Facts About Down Payments

If you are planning to buy your first home, saving for all of the expenses can be difficult, especially for the down payment. That could be because you have heard you need to save 20% of the home's price for a down payment. However, this is not always true.

Typically, putting 20% down is not necessary unless your loan type or lender specifically requires it. That means you could be closer to your homebuying dream than you realize.

As The Mortgage Reports says:

“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s a myth that this is always necessary. In fact, most people opt for a much lower down payment.”

According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today, it’s only 15%. And it’s even lower for first-time homebuyers, at just 8% (see graph below):

a graph of a number of blue squares

The big takeaway? You may not need to save as much as you originally thought.

Learn About Resources That Can Help You Toward Your Goal

According to Down Payment Resource, there are also over 2,000 homebuyer assistance programs in the U.S., and many of them are intended to help with down payments.

Plus, there are loan options that can help too. For example, FHA loans offer down payments as low as 3.5%, while VA and USDA loans have no down payment requirements for qualified applicants.

With so many resources available to help with your down payment, the best way to find out what you qualify for is to speak with your loan officer or broker. They are aware of local grant and loan programs that may be beneficial to you. 

Don’t let the misconception that you have to have 20% saved up hold you back. If you’re ready to become a homeowner, lean on the professionals to find resources that can help you make your dreams a reality. If you put your plans on hold until you’ve saved up 20%, it may actually cost you in the long run. According to U.S. Bank:

“. . . there are plenty of reasons why it might not be possible. For some, waiting to save up 20% for a down payment may “cost” too much time. While you’re saving for your down payment and paying rent, the price of your future home may go up.”

Home prices are expected to continue to rise over the next five years, which means that the longer you wait, the more expensive your future home will be. If you can use these resources to purchase now, future price increases will help you build equity rather than cost you more.

Bottom Line

Remember that you do not always need a 20% down payment to purchase a home. If you are planning a move this year, let us talk about your home-buying goals.

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