Purchasing a home is thrilling—until you consider the down payment. At that point, anxiety may start to creep in.
“I’ll never have enough saved up.”
“To get started, I need a little fortune.”
“I suppose I’ll just rent indefinitely.”
Does that sound familiar? You’re not by yourself. Furthermore, you are by no means out of luck.
The problem is that many of the things you’ve heard about down payments are simply untrue. You may discover that you’re much closer to becoming a home owner than you may have previously believed after learning the facts.
While we’re at it, let’s dispel some major misconceptions about down payments.
Myth 1: I need to come up with a big down payment.
Many people are stopped in their tracks by this one. According to a recent Morning Consult and NeighborWorks survey, 70% of Americans believe that in order to purchase a home, they must make a down payment of at least 10%. Additionally, 11% are completely unsure of what is needed (see graph below):
The reality? Since 2018, the average down payment for first-time homebuyers has been between 6% and 9%, according to the National Association of Realtors (NAR). However, there is more to the tale. You might only need to make a 3.5% down payment if you are eligible for an FHA loan. Additionally, there is usually no down payment needed for VA loans. Therefore, there are options available that can significantly impact certain buyers.
Myth 2: It’ll take forever to save up for a down payment
Yes, it can take time to save. However, it might not be as lengthy as you believe. Reaching your goal can happen more quickly than you might think in many states, especially if you have a clear savings plan and know your budget.
A recent study found that the duration differs based on one’s location. Based on average home values and income levels in each state, the map below illustrates the average number of years needed to save up for a 10% down payment.
However, keep in mind that you won’t typically even require a 10% down payment. Furthermore, you won’t have to pay for the entire amount of the down payment, regardless of how much you ultimately decide to contribute. Here’s why.
Myth 3: I have to do it all on my own.
Among the most significant myths of all is this one. In actuality, 39% of respondents to the Morning Consult and NeighborWorks survey are unaware of the existence of thousands of down payment assistance programs. This implies that many prospective homebuyers may already be on the verge of becoming homeowners; they are simply unaware of it.
People like you who are prepared to become homeowners but simply require a little help getting started are the target audience for these assistance programs. According to CBC Mortgage Agency President Miki Adams:
Down payment assistance is more important than ever in light of rising home prices and high interest rates.
Conclusion
Speak with a local real estate agent if you’ve been delaying the purchase of a home because you think the down payment is too large. You don’t have to do it alone because there are many resources available and you might not need as much as you believe. All you need to do is ask an expert to guide you.