As a homebuyer, there is a misconception that you need to get 20% of the total selling price in installments. A recent Lending Tree survey asks why consumers can’t buy a home. For more than half of the respondents, the ability to pay in installments is the biggest obstacle.
This may be because people accept that a 20% down payment is required. Buyers will benefit from depositing more money, but depositing 20% is not mandatory. As Freddie Mac says:
“The most harmful myth about down payments is the belief that 20% is needed, as down payments stop before they start the home buying process.”
If this sounds overwhelming, you may be ready to give up your home dream, but you don’t have to. According to the National Association of Real Estate Agents (NAR) Home Buyer and Seller Profiles, the median installment payments since 2005 have not exceeded 20%. For the first time, the number of homebuyers is even lower, with an average down payment of only 7%. According to NAR’s Generational Trends Report for Home Buyers and Sellers, the graph below shows up close the percentage of installments paid by different age groups.
Do I really need a 20% installment to buy a home?
On average, over 20% of groups are older homebuyers who are likely to take advantage of the sale of an existing home to generate a larger down payment for their next home.
What does that mean to you? If you’re a potential homebuyer, it’s important to know that you don’t have to pay the full 20%. Saving a down payment can be difficult, but keep in mind that there is a homebuyer program that qualifies you to buy a home with a down payment of 3.5%.
There are also options such as VA loans and USDA loans that do not require repayment for qualified applicants. To understand your choices, you need to do your homework. If you are interested in the details of the installment support program, you can find information on sites such as installment sources.com. Also, make sure you work with a real estate consultant well in advance to find out what you can qualify for when you buy a home.
Conclusion
Do not allow a 20% down payment to stop the home buying process before it starts.
Bottom Line
If you’re planning to be a homeowner one day, the best thing you can do is start preparing now. Even if you don’t think you’ll purchase for a few years, let’s connect today to discuss the process and to set you up for success on your journey to homeownership.
