The Truth About Down Payments

If youre planning to buy your first home, saving up for all the costs involved can feel daunting, especially when it comes to the down payment. That might be because youve heard you need to save 20% of the homes price to put down. Well, that isnt necessarily the case.

Unless specified by your loan type or lender, its typically not required to put 20% down. 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, its 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 hasnt been over 20% since 2005. In fact, for all homebuyers today its only 15%. And its even lower for first-time homebuyers at just 8% (see graph below):

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 what you qualify for is by consulting with your loan officer or broker. They know about local grants and loan programs that may help you out.

Dont let the misconception that you have to have 20% saved up hold you back. If youre 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 youve 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 youre saving for your down payment and paying rent, the price of your future home may go up.

Home prices are expected to keep appreciating over the next 5 years meaning your future home will likely go up in price the longer you wait. If youre able to use these resources to buy now, that future price growth will help you build equity, rather than cost you more.

Bottom Line

Keep in mind that you don't always need a 20% down payment to buy a home. If you're looking to make a move this year, reach out to a trusted real estate professional to start the conversation about your homebuying goals.

Venessa James - Broker Associate    

ABR, ALHS, CHMS, MCNE, LUXE, SFR, SRS  

Platinum Experience Group - KW Professionals 

(281) 889-8292 platinumexperiencegroup.com

Integrity, Experience, Results