Is the idea of saving for a down payment holding you back from buying a home right now? You may be eager to take advantage of todayโs low mortgage rates, but the thought of needing a large down payment might make you want to pump the brakes. Today, thereโs still a common myth that you have to come up with 20% of the total sale price for your down payment. This means people who could buy a home may be putting their plans on hold because they donโt have that much saved yet. The reality is, whether youโre looking for your first home or youโve purchased one before, you most likely donโt need to put 20% down. Hereโs why.
According to Freddie Mac:
โThe most damaging down payment mythโsince it stops the homebuying process before it can startโis the belief that 20% is necessary.โ
If saving that much money sounds daunting, potential homebuyers might give up on the dream of homeownership before they even begin โ but they donโt have to.
Data in the 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) indicates that the median down payment actually hasnโt been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. As the image below shows, todayโs median down payment is clearly less than 20%.
What does this mean for potential homebuyers?
As we can see, the median down payment was lowest for first-time buyers with the 2020 percentage coming in at 7%. If youโre a first-time buyer and putting down 7% still seems high, understand that there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5%. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.
Itโs important for potential homebuyers (whether theyโre repeat or first-time buyers) to know they likely donโt need to put down 20% of the purchase price, but they do need to do their homework to understand the options available. Be sure to work with trusted professionals from the start to learn what you may qualify for in the homebuying process.
Bottom Line
Donโt let down payment myths keep you from hitting your homeownership goals. If youโre hoping to buy a home this year, letโs connect to review your options.
Content previously posted on Keeping Current Matters
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