One of the biggest misconceptions for home buyers is how much you’ll need to save for a down payment. Contrary to popular belief, you don’t always have to put 20 percent down to buy a house.
A recent survey by Point2Homes notes that 88 percent of buyers say “they have significantly less savings than the average national down payment amount, which is $62,600.”
Thankfully, neither 20 percent, nor $62,600., is not the amount every buyer needs for a down payment. There are many different options available. That amount can also be significantly less, depending on the purchase price of the house.
According to the National Association of Realtors (NAR), “The median existing-home price for all housing types in August was $310,600.” (These are the latest numbers available). NAR also indicates that:
“In 2019, the median down payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers.” (See graph below):
2019 Median Percent Down Payment by U.S. Home Buyers:
That means if a qualified home buyer purchases a home at today’s median price, $310,600, with a 6% down payment, in reality, the down payment only amounts to $18,636. That’s nowhere near $62,600.
Typically, qualified buyers can obtain a Conventional loan with as little as a 5 percent down payment, and in some cases, as low as 3 percent down. (Although those programs will require mortgage insurance.)
There are also programs like FHA Loans where the down payment can be as low as 3.5 percent, and other programs such as USDA and VA loans that waive down payment requirements.
Unfortunately, the lack of knowledge about the home buying process is keeping many motivated buyers on the sidelines. That’s why it’s important to contact a local real estate professional to understand the requirements in your local area if you want to buy a home. A trusted agent and your lender can guide you through the process.
Bottom Line: Be careful not to let myths about home buying keep you out of the housing market. Let’s connect to discuss your options today.