Here’s What You Need To Know About Saving For A Down Payment
If you are currently planning on buying your very first home, then you are most likely saving for all of the various costs involved with such a major purchase. One of the biggest expenses that may be at the top of your mind is your down payment. If you are intimidated by the amount you’ll need to save for that, it may be because you believe that you must put 20% down. However, that is not necessarily the case. The National Association of Realtors explains that:
“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”
Additionally, a Freddie Mac survey finds that:
“...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.”
The good news is that unless specified by your loan type or lender, it is typically not required to put down 20%. This means that you could be closer to your homebuying dream than you realize.
According to the National Association of Realtors, the last time the median down payment was over 20% was in 2005. In 2023, the median down payment for all homebuyers is closer to 14%. Plus, for the homebuyers that are purchasing their first home, that number is even lower, at 6%.
What this means is that you may not need to save up as much money as you had originally planned.
Discover The Options That Can Help You Toward Your Goal
The amount you will be paying for your down payment isn’t the only common misconception. There are also misconceptions about down payment assistance programs. Many people falsely believe that the only way to get down payment assistance is if you are a first-time homebuyer. While it is true that first-time buyers have different options to explore, repeat buyers have resources as well.
Down Payment Resource explains that there are over 2,000 homebuyer assistance programs in the United States, and the majority of those are to assist with down payments.
“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.”
In addition, there are multiple loan types available, including FHA loans with down payments as low as 3.5% as well as options such as VA loans and USDA loans with no down payment requirements for qualified applicants. Plus, aside from loans, adjustable-rate mortgages are making a comeback.
The Bottom Line
If you are interested in learning more about down payment assistance programs, you can find information through websites like Down Payment Resource. It is also a good idea to partner with a trusted lender and real estate agent to learn more about your homebuying journey.
The main take-away is that a 20% down payment is not always required. If you are interested in buying your first home this year, contact Dianne Anderson today to start a conversation about your homebuying goals.