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You likely have a plan in place in preparation for buying a home, and you’re putting money away for it. However, do you know how much you need as a down payment?
Your goal may be based on a common misconception if you believe you need to put 20% down. Freddie Mac says:
“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”
In most cases, you don’t need to put down 20% if your loan type or lender doesn’t stipulate it. The National Association of Realtors (NAR) reports that the median down payment hasn’t exceeded 20% since 2005. Today, however, that number is only 13%. The median down payment for first-time homebuyers is even lower, at 7% (see graph below):
How Does This Impact You?
There are benefits to putting 20% or more down, but the typical buyer is putting far less down. It’s good news for you because it could mean you’re closer than you think to achieve your dream of buying a house.
There are several places where you can learn more about low-down-payment options. A down payment of 3.5% is an option for qualified buyers. Additionally, qualified applicants can take advantage of VA and USDA loans, which do not require a down payment.
Do your homework, so you understand your options. Sites like downpaymentresource.com provide information about down payment assistance programs. Don’t forget to work with a real estate advisor from the beginning to find out what you might qualify for.
Bottom Line
Don’t forget: a 20% down payment isn’t always required. Let’s discuss your options and start the conversation if you are interested in purchasing a home this year.
