It’s A Myth Requirement To Have A 20% Home Down Payment
By: Ian Golightly MBA, Realtor
Have you been thinking about purchasing a home but the idea of saving for a down payment is holding you back? You probably noticed that the mortgage rates are at an all-time low. Still, the idea of having to put down a lot of money for a down payment may be stopping you in your tracks. Interestingly, there is still a common myth that you are required to put a 20% home down payment of the total sale price of the home you want to purchase.
As a result, many people who could buy a home may be putting their initial plans on hold because they may feel like they don’t have that much money saved yet. Whether you are a first-time homebuyer or purchased a home before, the chances you need to put down a 20% down payment are highly less likely.
According to Freddie Mac, the median down payment in 2019 was 12% overall and only 6% for first-time homebuyers. Saving for a 20% home down payment can be very daunting depending on the area you are in and sometimes can take up to 10 years to save that amount. Also, if it’s that daunting, that means that homebuyers that can afford a home might give up on their dream when they don’t have to.
The National Association of Realtors has data from the 2020 profile of home buyers and sellers, indicating that the median down payment has not been 20% since 2005. The data also shows that those were from repeat buyers and not first-time homebuyers.
The data can be found here.
What Does This Mean For You And Your Home Down Payment?
For first-time homebuyers in 2020, the median down payment was only 7% of the home purchase price. There is no shame if you are a first-time homebuyer, and putting down 7% still seems out of reach. There are programs out there that will allow qualified buyers to purchase a home with a down payment even as low as 3.5%. There are also programs out there like VA loans and USDA loans requiring no down payment if you are a qualified applicant.
No matter if you are a first-time homebuyer or you’re also a repeat home buyer, it is essential that you know that you don’t need to put a 20% home down payment. It is also critical to understand what options are available for you. As a trusted real estate professional, we can help you start to learn what you may qualify for if you’re thinking about going through the home buying process.
Overall don’t let the down payment myth keep you from your goals of owning a home.