“20% Down? That’s Crazy”

“20% Down That’s Crazy”

That’s what we have been told our entire lives… To have the house with the white picket fence, you need that 20%, 10%, whatever % to even get started. Here’s what the experts have to say summed up by my friends at KCM with some splashes of my knowledge thrown in!

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

If you’re planning to buy your first home, then you’re probably focused on saving for all the costs involved in such a big purchase. One of the expenses that may be at the top of your mind is your down payment. If you’re intimidated by how much you need to save for that, it may be because you believe you must put 20% down. That doesn’t necessarily have to be the case. As the National Association of Realtors (NAR) notes:

“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.”

Interested in learning more? Get your free first time home buyer education from one of the best in the mortgage industry, Guaranteed Rate! My friends Jason Chandler and Kyle Starek are top notch when it comes to working with first time home buyers! And of course, I am here to walk you through the steps if you need help.

Here’s the good news. Unless specified by your loan type or lender, it’s typically not required to put 20% down. This means you could be closer to your home buying dream than you realize.

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):

What does this mean for you? It means you may not need to save as much as you originally thought.

Learn About Options That Can Help You Toward Your Goal

And it’s not just how much you need for your down payment that isn’t clear. There are also misconceptions about down payment assistance programs. For starters, many people believe there’s only assistance available for first-time homebuyers. While first-time buyers have many options to explore, repeat buyers have some, too.

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. I have several that I highly recommend. Connect with me for more information!

Bottom Line

Remember, a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation about your homebuying goals!

Jamie Canman, Realtor with Century 21 Advantage, 618-334-1876