Saving up to purchase a home can be pretty daunting, especially these days. For many first-time buyers, the thought of needing to put down 20% can seem like a huge obstacle.
That's a common misunderstanding. Let me clarify the reality for you.
Do You Really Have To Put 20% Down When You Buy a Home?
You probably won't need to put down 20% unless your loan type or lender specifically asks for it. There are plenty of loan options available that can help first-time buyers like you get approved with a much smaller down payment.
FHA loans let you put down just 3.5%, while VA and USDA loans don’t require any down payment for those who qualify, including veterans. So, even though putting down a larger amount can be beneficial, it’s not a must.
““. . . many homebuyers are able to secure a home with as little as 3% or even no down payment at all . . . the 20 percent down rule is really a myth.”
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The National Association of Realtors (NAR) reports that first-time homebuyers typically make a median down payment of only 9%. Check out the chart below for more details.
The key point? You might not have to save as much as you initially believed.
Many programs can help increase your down payment savings, and you might not even know they exist.
Why You Should Look into Down Payment Assistance Programs
It's surprising, but nearly 80% of first-time homebuyers are eligible for down payment assistance (DPA), yet only about 13% take advantage of it.
That's a significant amount of missed opportunity. These programs can provide substantial assistance, with some offering thousands of dollars specifically for your down payment. As Rob Chrane, Founder and CEO of Down Payment Resource, points out:
““Our data shows the average DPA benefit is roughly $17,000. That can be a nice jump-start for saving for a down payment and other costs of homeownership.”
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Imagine how much more you could stretch your homebuying savings if you qualified for $17,000 in assistance. In certain situations, you might even stack multiple programs together, amplifying your savings even further. These are the kinds of benefits you definitely don’t want to miss out on.
Bottom Line
Saving for your first home might seem overwhelming, especially if you believe you need to put down 20%. However, that's a common misconception. Numerous loan options require a much smaller down payment, and there are programs available that can help you increase your savings as well.
