Whenever a buyer thinks about a downpayment twenty percent comes to mind. This is a common misunderstanding that homebuyers have to come up with twenty percent. According to Lending Tree over half of the people surveyed said that a down payment is the biggest deterrent to purchasing a home.
Freddie Mac states “The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20 percent is necessary.”
The Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) reports that the median down payment hasn't been over twenty percent since 2005. The current average downpayment is twelve percent and even lower for first-time homebuyers at 7%.
There are benefits to putting 20 percent down on a new home. One of the best perks is not having to obtain Private Mortgage Insurance (PMI). PMI is insurance that protects your mortgage lender in case you do not make your mortgage payments. Even if you are unable to put twenty percent down, you can ask your lender to remove PMI once you have obtained twenty percent equity in your home.
There are even good benefits for those who can put over twenty percent down. The more money you put down, the better interest rate you can get. This is not wise to do if you might need the cash in the near future. A first-time homebuyer might also opt-out from doing this because you might run into unplanned repairs or updates.
Saving for a downpayment can take time for some and be stressful. Trying to save 20 percent or more might take some months, years, or even longer. Waiting to save this much might not be in your best interest because you might miss out on a good opportunity. As you save money home vales are going up and you will lose out.
Currently, the mortgage rates are at historic lows. There are several programs that are for homebuyers to purchase a home with no money down. There are also some programs that will accept as little as 3% down.
If you are considering purchasing a home, contact a local Realtor who can help you with the loan, downpayment and home buying process. Remember interest rates are low and you do not need a huge down payment to thrive as a new homeowner.
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