Do You REALLY Need 20% Down Payment for a House?
A Common and Costly Misconception
It's likely that at least one person who you contacted for advice on how much to save suggested you set aside 20% of the buying price as your down payment. Although it's excellent if you can manage it, first-time buyers may find it difficult to save that much money.
There is good news, though. Although well-intentioned, that suggestion is probably based on a widespread misunderstanding. 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.”
The truth is, you may not need to save as much as you think. Unless specified by your loan type or lender, it’s typically not required to put 20% down.
The median down payment hasn't exceeded 20% since 2005, according to the NAR's Profile of House Buyers and Sellers. For all home buyers today, the median down payment is only 13%. And for first-time homebuyers, it's considerably cheaper. Usually, they've only put down 7%. Even better, for buyers who meet the criteria, there are loan options that call for as little as 3.5% (or even 0%) down:
What Does This Mean for You?
While a down payment of 20% or more does provide benefits, the typical buyer is putting far less than that down. That's wonderful news for you since it suggests that you might be closer than you think to realize your ambition of owning a home.
There are various locations to go if you want to learn more about low downpayment choices. For suitable buyers, there are programs with down payments of as little as 3.5%. Additionally, options like VA and USDA loans don't require a down payment from qualifying candidates.
You must research the programs available if you want to understand them. Websites like downpaymentresource.com offer information. Yet it also helps to seek out the opinions and views of professionals. Work with a real estate advisor right away to find out what you might be eligible for during the home-buying process.
Don’t let down payment myths keep you from hitting your homeownership goals. If you want to buy this year, let’s review your options together!
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