The Misconception of Down Payments

Getting ready to buy your first home can be overwhelming, particularly when it comes to saving for all of the costs involved; especially the down payment. You’ve probably heard that you need to save 20% of the purchase price to use for a down payment on a home. The idea of saving that much money can make you feel doubtful of ever realizing your dream of buying a home, but not to worry…that’s not always the case.

Unless your lender or loan type requires it, putting 20% down is not typically required. That’s great news for you because that means you could be closer than you think to making your home-buying dream a reality!

This is what Mortgage Reports has to say:

“Although putting down 20% to avoid mortgage insurance is wise if affordable, it’s 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 has not been more than 20% since 2005. The fact is, it’s only 15% for all homebuyers today. And…for first-time homebuyers, the figure is even lower, at a mere 8% (see the graph below): 

The key takeaway is that you might not have to save as much as you initially thought.

 

Resources That  Can Help You Reach Your Goal

There are over 2000 homebuyer assistance programs in the US, according to Down Payment Resource.  These are worth checking into because many of them are geared toward helping with down payments. 

Plus, there are several loan options that can also help. For instance, FHA loans allow down payments as low as 3.5%, and VA and USDA loans have no down payment requirements for eligible applicants.

With so many resources available to help you with your down payment, the next best thing to do would be to consult with your lender or broker. They will have insight into local grants and loan programs that can help you out. Our agents at Emmer Real Estate Group can connect you with local lenders who will get to know you and your home-buying goals to make sure they find the right program for you!  Contact us today! 

So let go of the misconception that you have to save 20% for a down payment. If you’re ready to become a homeowner, rely on the professionals!  They will find the resources to help turn your dreams in reality! Delaying your plans to save up the 20% down payment may cost you more in the long run, as highlighted by 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 you’re saving for your down payment and paying rent, the price of your future home may go up.”

Over the next five years, home prices are expected to continue to rise. This means that the longer you wait, the more your future home will likely cost. If you’re able to use these resources to buy now, that future price growth will help you build equity, rather than cost you more.

In Summary

Taking the time to save for a 20% down payment isn't always required for buying a home and the time it takes you to save that much may cost you more in the long run. If you're planning to make a move this year, give us a call here at Emmer Real Estate so we can help you meet your homebuying goals.

 

 

Source: Keeping Current Matters