Saving for a Down Payment? Here’s What You Need To Know.

Saving for a Down Payment? Here’s What You Need To Know.

If you're going to purchase your first home, you're undoubtedly concentrating on saving money for all the expenses associated with such a significant investment. Your down payment can be one of the costs that comes to mind first. It's possible that you must pay 20% down if the amount you need to save for that intimidates you. That isn't required to be the case, though. According to the National Association of Realtors (NAR):

“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”

And a recent Freddie Mac survey finds:

“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”

Now for the good news. 20% down payment is normally not required unless your loan type or lender specify it. This suggests that you might be closer to realizing your ambition of owning a home than you think.

According to NAR, the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 14%. And it’s even lower for first-time homebuyers at just 6% (see graph below):

In what ways does this affect you? Therefore, you might not need to save as much as you initially believed.

Discover Options That Can Advance You Toward Your Goal
And it's not simply the amount of the down payment that is unclear. Misconceptions regarding programs that offer aid with down payments also exist. To begin with, a lot of people think that first-time homebuyers are the only ones eligible for assistance. There are several alternatives available for both first-time and return buyers.

According to Down Payment Resource, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. That same resource goes on to say:

“You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.”

Plus, there are even loan types, like FHA loans with down payments as low as 3.5% as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.

If you’re interested in learning more about down payment assistance programs, information is available through sites like Down Payment Resource. Then, partner with a trusted lender to learn what you qualify for on your homebuying journey.

To sum up, keep in mind that a 20% down payment isn't always necessary. Let's meet and talk about your homebuying goals if you want to buy a house this year.