One of the most common home-buying myths has to do with down payments. You’ve probably heard it-that you need a 20% down payment to purchase a home. You may be surprised to learn that this just isn’t true these days.
How Much Should You Put Down?
According to the National Association of Realtors, the average down payment is just 12% among all buyers. Younger buyers tend to put down even less. Those that are between the ages 22 and 30 put down 6% on average. The following graph shows average down payments based on buyer age.
Many financial experts will recommend a 20% down payment, as it helps you qualify for a mortgage. But there are other factors to consider. As prices continue to rise in today’s market, a 20% down payment on a single-family home could easily be in the $300,000 range, well out of reach for most families, especially those looking to purchase their first home.
Of course, you don’t always need a 20% down to qualify for a loan. NAR states that many conventional lenders will work with a down payment as low as 3%, while some government lenders don’t require any down payment at all. Some lenders like FHA, USDA, and VA may offer such loans.
When Is It The Right Time To Buy?
Another misconception among buyers, including young adults, is that waiting for mortgage rates to lower will better their chances of buying. For example, 2 out of 3 surveyed by Lombardo homes stated that they were waiting to buy until the mortgage rates dropped. In reality, mortgage rates are expected to creep up in the coming weeks.
These and other popular home buying myths are another reason to work with an experienced agent when buying a home. Your agent can help you navigate the sometimes confusing world of real estate and help you make the best choices when purchasing a new home.
What Can You Do Now?
Work with your agent if you see a house you like, but the price is out of budget. Speak to them about down payments and the necessary steps to making an offer. They can give the best advice possible and get you a deal if needed.
Have more questions about down payments? Click below and we’ll have an answer for you shortly!