Myth 2: I Need To Have a 20% Down Payment

If you’re planning to buy your first home, then you’re probably focused on saving for all the costs involved in such a big purchase. One of the expenses that may be at the top of your mind is your down payment.

A Common and Costly Misconception

If you’re intimidated by how much you need to save for your down payment, it may be because you believe you must put 20% down. That doesn’t necessarily have to be the case. As the National Association of Realtors (NAR) notes:

“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”

And a recent Freddie Mac survey finds:

“. . . 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.”

Here’s the good news. Unless specified by your loan type or lender, it’s typically not required to put 20% down. This means you could be closer to your homebuying dream than you realize

According to NAR, the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 14%. And it’s even lower for first-time homebuyers at just 6% (see graph below):

What Does This Mean for You?

It means you may not need to save as much as you originally thought.

And it’s not just how much you need for your down payment that isn’t clear. There are also misconceptions about down payment assistance programs.

According to Down Payment Resource, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments.

Plus, there are even loan types, like FHA loans with down payments as low as 3.5% as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.

If you’re interested in learning more about down payment assistance programs, information is available through sites like Down Payment Resource. Then, partner with a trusted lender to learn what you qualify for on your homebuying journey.

Bottom Line

Remember, a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation about your homebuying goals.