A recent Point2 survey found that 74% of millennials aim to buy a home in the next year.
This isn’t surprising news, considering the age of millennials and historic-low mortgage rates. However, 40% of those surveyed expect a downpayment to be less than $10,000. With the national average downpayment amount at around $62,000, this raises the question:
How much do I need for a downpayment?
Saving for a Home
Before buying a house, most people are aware of the importance of saving money. Not only is this important for downpayment costs, but also closing costs and any needed repairs you want to make your first year in a new home. According to the study, depending on where you live, it can take between 2-10 years to save up for a downpayment – IF you plan on putting 20% down.
Downpayments Over the Years
It’s true in the past, 20% was needed to buy a home. As home values have risen over the years, that number has shifted. Take a look at median downpayments for all buyers, first-time buyers, and repeat buyers, according to NAR’s 2020 Downpayment Expectations.
In 1989, the median downpayment was:
- 20% for all buyers
- 10% for first-time buyers
- 23% for repeat buyers
In 2019, the median downpayment was:
- 12% for all buyers
- 6% for first-time buyers
- 16% for repeat buyers
What You Need for a Downpayment
Depending on your current financial situation, what loan you qualify for, and your homeownership status, the amount you need to save up can vary.
Some programs, including FHA, allow qualified first-time buyers to purchase a loan with as little as 3.5% down. Below, we calculate what you would need to save for a downpayment on a $310,600 home (the current median price of a house) at 3.5%, 6%, 12%, and 16% down.
|3.5% (FHA and other programs)||6% (2019 average for first-time buyers)||12% (2019 average for all buyers)||16% (2019 average for repeat buyers)|
Whether in a buyer’s market of a seller’s market, the first step of homeownership begins with getting your finances in order. If you are ready to learn more about the process of buying or selling, contact us today!Contact Us!