Saving for a down payment for a home has probably been in the back of your mind for as long as you can remember, and now that you’re ready to make the first step toward buying, that thought has become a reality. You may still have questions about the process, including how much to save and where to start. There is a lot of confusion in this area that may make buying a home seem impossible, but your down payment could be more within reach than you originally thought. Here’s why.
The 20% Down Payment Myth
If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Most first-time homebuyers I talk to think they need a down payment of 20% or more to buy a home. So where does this myth come from? The 20% down myth comes from the private mortgage insurance (PMI) rule that most lenders and mortgage investors have. Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down.
According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are 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. This might be music to your ears if it means you could be closer to your homebuying dream than you realize. For more information on these loans, turn to a trusted lender.
Home Affordability
As I have mentioned in my previous blog, Home Buyers’ Most Common Questions Answered, the first step in your home-buying journey should be finding out how much you can actually afford. Once you know this, you’ll be able to have a better expectation of what your down payment should be. You may need to cut costs and work with a financial advisor to budget better while saving for that down payment.
Down Payment Assistance Programs Can Be a Game Changer
A professional will be able to show you other options that could help you get closer to your down payment goal. According to the latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments.
A recent article explains why programs like these are helpful:
“These resources can immediately build your home buying power and help you take action sooner than you thought possible.”
If you’re wondering if you have to be a first-time buyer to qualify for these programs, that’s not always the case. According to an article from downpaymentresource.com:
“It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.”
There are also location and profession-based programs you could qualify for as well.
Bottom Line
Saving for your down payment is an important first step on your homebuying journey. Let’s connect today and make sure you have a trusted lender to help explore your options.
