September 8th, 2019 12:09 PM by Jackie A. Graves, President
Buying a home is often one of the most expensive endeavors one
will take throughout their life, so it’s not surprising that saving for a down
payment remains a major hurdle for many Americans on their path to
homeownership. But although a 20 percent down payment is considered ideal, it’s
not actually as common as you might think, nor is it a necessity to buying a
to the Zillow Group Consumer Housing Trends Report 2018,
the majority (52 percent) of buyers put down less than 20 percent on their new
you have to put between 3 and 20 percent of your home’s sale price down in cash
to qualify for a conventional loan (30-year fixed mortgage), but there are
exceptions. If you meet eligibility guidelines, you might qualify for a home
loan with a zero-down payment through Veterans Affairs
(VA loans) or the Department of Agriculture (USDA loan) programs.
payment is the amount of money you spend upfront to purchase a home and is
typically combined with a home loan to fulfill the total purchase price of a
home. In addition your down payment amount, your credit score, credit history,
total debt and annual income will influence how much of a loan you can qualify
tool to see how much you can afford based upon your down payment and annual
income is our affordability calculator. It will also take
into account your monthly debts, the interest rate on your debt, your loan
term, and many other settings that you can personalize to give you a more accurate
result on a home price.
are able to come up with a 20 percent down payment, you’d reap quite a few
benefits. Putting that larger amount down lets you avoid paying private
mortgage insurance (PMI), it can help you qualify for a lower interest rate
(which can help you save thousands over the life of your loan), it’ll give you
more equity faster, and it will result in a smaller monthly mortgage payment.
Depending on where you’re looking to buy a home, a larger down payment might
also help you be a competitive buyer and stand out to the seller if there are
multiple offers on the home.
20 percent isn’t a prerequisite to homeownership, many buyers do put that
amount down and then some. Larger down payents are more prevalent for buyers in
the West (47 percent put down 20 percent or more) and the Northeast (52 percent
put down 20 percent or more). This is because of tighter markets and the need
to present a more competitive offer to a seller in order to win the home.
because some buyers are able to put more than 20 percent down doesn’t mean they
don’t struggle coming up with the money. According to a Zillow survey, 68
percent of renters cite saving for a down payment as the biggest hurdle to
buying a home.
one-third of buyers (29 percent) struggle saving up money for a down payment.
Most (53 percent) do it by saving up the old-fashioned way. But nearly
one-quarter (24 percent) are getting more creative and combining two or more
sources to finance their down payment.
buyers have found luck using more creative ways to fund their down payment by
receiving gifts from family or friends, selling stocks or other investments,
using retirement funds, asking for a loan from family and friends or using
leftover money from the sale of a previous home.
repeat buyers can often put some of the money from their previous home sale
towards their down payment, they’re more likely than first-time buyers to put
down larger lump sums. First-time buyers, however, are more likely to put down
between 3 and 9 percent. According to a Zillow survey, only 37 percent of
first-time buyers pay 20 percent or more.
getting a zero-down payment loan is challenging and you have to be a strict set
of criteria, there are other programs that offer low down payments that may be
the most popular of the low-down payment loans is a Federal Housing
Administration (FHA loan), which allows for a 3.5 percent down
payment. One of the downfalls of this program, however, is that you still have
to pay mortgage insurance premiums to protect the lender if you default on your
are also taking advantage of two Fannie Mae offer loans; Conventional 97 and HomeReady mortgages, which
both allow for a minimum down payment of just 3 percent. HomeReady mortgages
are designed for creditworthy, low-to moderate-income borrowers, with expanded
eligibility for financing homes in designated low-income, minority, and
disaster-impacted communities. Conventional 97 mortgages are designed to help
creditworthy home buyers who would otherwise qualify for a mortgage but may not
have the resources for a larger down payment.
of these Fannie Mae, FHA, VA and USDA loan types, there are state and local assistance programs that
can help you get into a home with a low-down payment. There are also towns that offer incentives to move there, ranging
from student loan forgiveness to free lots of land to build on. Even though
these programs don’t cover your down payment for you, they can help you save
money elsewhere if you can come up with the initial down payment up front.
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