Potential Homeowners Overestimate Down Payment

For years and years, consumers have held on to the belief that a 20% down payment is required to purchase a home.

And that 20% becomes a deterrent for many would-be homeowners.

According to the National Association of Realtors’® recent survey, the average down payment among all buyers is actually much, much lower – it’s just 12%.

So where did potential homebuyers get the idea that 20% is the requirement? Financial experts agree that a 20% down payment is ideal, because it helps homeowners avoid extra costs, like private mortgage insurance. Obviously, if a 20% down payment is something in your wheelhouse, then it’s the favorable opinion to put that much down.

But is a 20% down payment reasonable, or even possible for most?

NAR’s example of almost unreachable 20% down payments points to the Los Angeles area, where a 20% down payment could be between $200,000 to $400,000 – and that’s just an entry-level, single-family home. 

So clear the idea that you need 20% to even enter the arena of becoming a homeowner – because it’s just not true. Younger buyers (those aged between 22-30) tend to put down the least, at an average of 6%. Those between the ages of 31 and 40 make an average 10% down payment.

NAR”s infographic

But that’s not even the lowest a potential homeowner can go when it comes to making a down payment. Some lenders allow buyers to purchase a home with a down payment as low as 3%, and even some government programs allow no money down (VA issue loans).

If you’re sweating at a 20% down payment, you’re not alone. There are other options for you to reach your goal – as long as you talk with your lender and real estate agent to better understand your finances and where you’re at.

For more real estate news, stop by Alliance Title’s Blog.

Share this article:

Leave a Reply

Your email address will not be published. Required fields are marked *