So let me ask you…. Is the idea of saving for a down payment holding you back from buying a home right now? Do you need to have 20 percent down to purchase a home? You might be eager to take advantage of today’s near-record low mortgage rates, but the thought of needing a large down payment might make you want to pump the brakes. Even today, with all of the resources and technology we have, there is still a common myth that you have 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 of a down payment saved yet.
The reality is, whether you’re looking for your first home or you’ve purchased one before, you most likely don’t need to put 20% down. 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 you even begin – but you don’t have to.
Data in the 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) indicates that the median down payment actually hasn’t been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. Today’s median down payment is clearly less than 20%. For first time home buyers, the median down payment is 7%, and for repeat home buyers it is 16%, with a median down payment of 12% for all home buyers.
But Jordan, What does this mean for potential homebuyers?
As we now know, the median down payment was lowest for first-time buyers with the 2020 percentage coming in at 7%. If you’re a first-time buyer and putting down 7% still seems high, understand that there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5% through the Federal Housing Administration. The max FHA loan limit in Clark County, Nevada is $362,250 for 2021. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.
It’s important for potential homebuyers — whether you are a repeat or first-time home buyer — to know they likely don’t need to put down 20% of the purchase price, but you do need to do their homework to understand the options available. Be sure to work with a trusted professional, like Chuck Barone with Right Choice Financing, from the start to learn what you may qualify for in the homebuying process.
Don’t let down payment myths keep you from hitting your homeownership goals. If you’re hoping to buy a home this year, or have any questions, you can contact me directly by calling or text at (702) 767-5557 or by email at jordan@doveandassociates.com
On behalf of Dove & Associates powered by Nationwide Realty, we wish you all great health, and blessings. Go get ‘em.
