Maybe you’ve already owned a home, or maybe you’re hoping to become a homeowner for the first time. Either way, there are bound to be plenty of questions about how much you really need to save and where you can find down payment assistance. Let’s help you answer these questions fast.
The majority of people don’t know most buyers need to put down just 1-5%
So, how much down payment do you really have to save?
For a long time, there have been misconceptions about down payment amounts. Fannie Mae’s recent survey revealed that just 17 percent of people know about down payment minimums, ranging from 1 to 5 percent of a home’s purchase price. Forty percent of people don’t know how much down payment they need to buy.
Many mortgage programs are geared toward first-time buyers and may require down payments as low as 3 percent. Other mortgage programs only require a 3.5-percent minimum down payment for repeat buyers. Specialty loan programs for veterans may do away with upfront payment altogether, with no down payment requirement.
These days, you don’t need a 20-percent down payment and saving for a 3 or 10-percent down payment may be quicker than you think, depending on housing prices in your area. If you put down only a minimum of 3 percent, research suggests you could potentially set aside enough money for your down payment in well under a year in most states. This makes homeownership much more attainable for many prospective buyers.
To pay or not to pay? Click here to get prequalified from anywhere and find out if you’re eligible for a low (or no) down payment.
But can you get help for your down payment?
Even with these affordable loan options, many homebuyers are still looking for down payment assistance. Thankfully, there’s great news. There are multiple types of down payment assistance for different buyers, and here are just a few.
Family member assistance.
According to NAR (The National Association of Realtors), “A third of recent first-time buyers received down payment assistance from family members.” NAR also said, “The average net worth of those aged 75 and over stands at $264,800… They just might offer the boost the next generation needs to become homeowners.”
One helpful way to fund a down payment is to receive a gift from a relative. If that sounds like a potential option, take time to talk with your loan officer before accepting any money. You’ll want to ensure the process is documented to meet your mortgage’s requirements. Documenting down payment cash received will help your loan to be processed properly, without affecting how you qualify.
Programs for down payment assistance.
In reality, not all homebuyers have a family member or loved one who’s able to help out and gift funds for a down payment. But there are over 2,500 programs available for down payment assistance, often in local areas broken down by neighborhood, city, or county. Some of these programs are made especially for first-time homebuyers.
Here’s the rub, based on Fannie Mae’s survey: “Only 23 percent of consumers are familiar with low-down-payment programs.”
This is why it’s essential to familiarize yourself with your DPA (down payment assistance) options and do your homework before you prepare to buy. Find out what type of down payment assistance is available in the area where you would like to live, and you’ll have the information you need to take advantage of the DPA option that most benefits your family.
The bottom line: If you plan on buying a home in the near future, you may be ready to become a homeowner sooner. Help from family members and down payment assistance programs are making homeownership more affordable for many.
Here’s what happens when you put less than 20% down to buy
Paying more for a down payment can be a good idea if you have it: Doing this can subtract from your loan balance and give you more room to grow equity. But most homebuyers who are ready to move while prices are stable and rates are great don’t take the extra time to save. Since the old 20-percent down payment rule is no longer an industry norm, it may take you mere months or even weeks to come up with your down payment. Even better? You can use one of our low- or no-down-payment mortgage programs and get home in 10 days.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.