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April 14, 2021

Do I Really Need a 20% Down Payment?

If you think 20% down is standard when buying a home, you'll want to hear about the new options that make buying accessible with less down.

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 today’s low mortgage rates, but the thought of providing a large down payment might make you want to pump the brakes. Today, there’s still a common myth that you need 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 don’t have that much in the bank yet. The reality is – whether it’s your first home or you’ve purchased one before – you most likely don’t need a 20% down payment. Here’s why. According to Freddie Mac:
“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”
If saving that much money sounds daunting, potential homebuyers might give up on the dream of homeownership before they even begin – but they don’t have to. The 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) notes how the median down payment hasn’t been over 20% since 2005, and even then, that was only for repeat buyers, not first-time homebuyers. As the image below shows, today’s median down payment is clearly less than 20%.

What does this mean for potential homebuyers?

If you’re a first-time buyer and putting down 7% still seems high, understand that there are programs allowing 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. It’s important for potential homebuyers to know they likely don’t need a 20% down payment, but they do need to do their homework to understand the options available. When you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with trusted professionals from the start to learn what you may qualify for in the homebuying process.

Bottom Line

Don’t let down payment myths keep you from hitting your homeownership goals. If you’re hoping to buy a home this year, let’s connect to review your options.

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