April 26th, 2018 8:43 AM by Jackie A. Graves, President
Are you looking to buy a home this spring,
but are worried you don't have enough for a 20% down payment? Good news: You
can put down less than 20%. In fact, the average down payment for first-time
homebuyers in 2017 was 5%, and 10% for repeat buyers, according to the National
Association of REALTORS®. And, it's
possible to put down even less. For example, Freddie Mac Home Possible® mortgage products let eligible
homebuyers put down as little as 3%.
Putting less than 20% means you'd likely have higher monthly
payments and you'll be required to pay private mortgage
insurance (PMI). However, if putting 20% down is not an option or
will deplete all your savings and leave you with no financial cushion, it's
probably not in your best interest.
potential buyers are also unaware of the fact that their down payment can come
from sources other than personal savings. Some mortgage products let you use
gifts from your family or employer. Others let you use grants or loans from
not–for–profit or government agencies.
of programs provide down payment assistance, with eligibility requirements
varying based on your location and generally limited to first–time and/or low–
and moderate–income homebuyers. Certain programs specifically benefit veterans,
Native Americans, and workers employed in education, health care, law
enforcement, and firefighting.
U.S. Department of Housing and Urban Development (HUD) gives grants to state
and local organizations nationwide. These organizations, in turn, use these
funds to help homeowners bridge the down payment gap. To find the programs in
your area, check out HUD's listing or
Down Payment Resource's handy tool.
State and local housing finance agencies (HFAs) administer many of these
programs. Go to the National Council of State Housing Agencies' web site for a state–by–state
add up what this all means, using the following example:
5% Down Payment
20% Down Payment
Monthly Mortgage Payment
(Principal and Interest)
Total Monthly Payment
*Assuming an insurance rate
of 0.51%; this cost can be cancelled from your payment once you reach 20%
equity in your home for conventional loans.
**Does not include property
tax and homeowners' insurance payments
Before signing on the dotted line, it's important that you
understand your finances – and shop around
for the best mortgage terms that fit your needs.
Visit My Home by
Freddie Mac® to learn all you need
to know about the homebuying process and be sure to follow our Spring
Homebuying blog series.
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