Buying a home can be a complicated process. Unfortunately, many people have misconceptions about what is required when it comes to homeownership.
Specifically, new data from the National Association of Realtors has revealed that most people aren’t sure what kind of down payment would be required to buy a home.
The NAR study found that consumers generally think they will need a median down payment of 20% of the value of the home to be able to purchase a property. And up to 35% of people think they should provide 16% to 20% of their home‘s value to use as a down payment.
If you think this might be a good time to buy a home, don’t get carried away by the mistaken belief that you need a large deposit to become an owner. Here’s what you need to know.
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How Much Down Payment Do You Really Need to Buy a Home?
First of all: putting 20% ââon a house is definitely the best decision if you can do it. A deposit of 20%:
- Offers you the widest choice of mortgage lenders
- Helps you get a better mortgage rate, as lenders view loans with larger down payments as less risky
- Allows you to avoid paying for private mortgage insurance, which is insurance you pay as part of your monthly fee, even though it only protects the lender (not you) against loss in the event of foreclosure
- Helps you avoid ending up with a mortgage that exceeds the value of your home, which could create huge problems if you want to refinance or sell your property
But while a 20% down payment is ideal, it is usually not obligatory.
The reality is that many conventional lenders will allow you to buy a home with a lot less money – sometimes as low as 3% (although 10% is more common). And some government guaranteed loans will even let you buy a home without a down payment.
For more information on getting a mortgage with a minimum down payment, see the following resources:
Should we put less than 20%?
While putting 20% ââless is the best bet if you can do it, for some people it would be difficult if not impossible, especially in an area with a high cost of living. If you took 20 years to save up to 20% down payment, it doesn’t make sense to keep renting for most of your adult life just because the down payment requirements are hard to meet. fill in for you.
If you’re 100% sure you can afford the mortgage payments, can get approved for a loan at a good rate, and otherwise are financially ready to buy a home but don’t have 20% to pay, so do not leave a misunderstanding. regarding your down payment requirements are keeping you from moving forward. Start looking for the right home for you so that you can start enjoying all the benefits that can come from owning your own home.