If you’re about to buy your first home, you’re probably saving up for all of the costs that come with it. Your down payment is probably the first cost that comes to mind. But don’t make it harder than it needs to be by believing a common myth about how much you need to save.
Understand That a 20% down payment isn’t always the norm
Freddie Mac explains:
“. . . 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.”
Most of the time, you don’t have to put 20% down unless your loan type or lender says so. This means that you might be closer to buying a home than you think. The National Association of Realtors (NAR) says that since 2005, the average down payment has never been more than 20%. In fact, the average down payment is only 14% these days. And for first-time homebuyers, it’s even lower, at just 6% (see graph below):
Find out what you can do to help you reach your goal.
If it’s still hard for you to save for a down payment, know that you can get help. A real estate agent and a lender you trust can show you options that could help you get closer to your goal of having a down payment. According to the latest Homeownership Program Index from Down Payment Resource, there are more than 2,000 programs in the U.S. that help people buy homes. Most of these programs help with down payments.
There are also loan types, like FHA loans, with down payments as low as 3.5% and options, like VA loans and USDA loans, that don’t require a down payment from qualified borrowers.
Do your homework to know what your options are. If you want to learn more about programs that help with the down payment, you can find information on sites like Down Payment Resource. Then, work with a trusted lender to find out what kind of home loan you can get.
Remember that you don’t always have to put down 20%. If you want to buy a home this year, talk to a reputable real estate agent to start a conversation and find out what your down payment options are.